Leboeuf claims Chelsea have no better players than Lampard, and the 34-year-old should be rewarded with a new deal. His current Stamford Bridge contract expires at the end of the season, and speculation has linked the England international with a host of other clubs.
But Leboeuf, who spent five years at Stamford Bridge from 1996 to 2001, thinks Chelsea would be foolish to let him leave.
Speaking to talkSPORT radio, Leboeuf said: "If you don't find somebody better than him in his position, why do you want to get rid of him?
"The games I have seen of Frank playing, I don't see a better player right now at Chelsea. So why do you want to get rid of him? They need him right now.
"If you have young players as good or better than Frank Lampard, then yes you should replace him. But if there is nobody better than him, you have to keep him. It's as simple as that.
"He won't play every game but he will be very useful. He's a leader in the dressing room, he scores goals, he is a leader on the field. I'm certain that he is going to be useful and Chelsea need him."
Lampard is Chelsea's third top scorer this season with 13 goals, and is just three short of Bobby Tambling's all-time club record of 202.
Reports in recent weeks have suggested Lampard is set to hold talks with the Stamford Bridge hierarchy before the end of the season, while conflicting reports have claimed he's set to leave, with Manchester United interested.