The 35-year-old has been at the Anfield club since the age of nine, clocking up more than 700 senior appearances since making his debut in 1997 against Middlesbrough.
However, under new manager Brendan Rodgers, Carragher has found his first-team opportunites limited, featuring just 12 times in the Premier League this campaign.
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"I'm making this announcement now because I don't want the manager or the club to be answering questions on my future when I've already decided what I am going to do.
"I will be fully committed between now and the end of the season to doing the very best for Liverpool, as I've done my entire career since joining aged just nine years old."
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"It has been a privilege and an honour to represent this great club for as long as I have and I am immensely proud to have done so and thankful for all the support I have had," he enthused. "There are many memories I want to share and people to thank but now is not the time for that.
"I won't be making any further comment on this decision until the end of the season; all our focus and concentration should be on achieving the best possible finish in the league this season and trying to win the last remaining trophy we are competing in."
Liverpool's last home fixture of the season is against QPR on May 19 in the Premier League.