Terry has been in the spotlight since he was alleged to have racially abused QPR defender Anton Ferdinand three weeks ago, an allegation which is now the subject of a Metropolitan Police investigation.
Lampard will lead his country against world and European champions Spain in Saturday's friendly at Wembley with Terry not under consideration to start the game.
But the decision has been made for footballing reasons by manager Fabio Capello, and Lampard was quick to show his support for Terry.
When asked if Terry was a racist, Lampard said: "That's a ridiculous question. No. Absolutely not. Absolutely not.''
Lampard, who is also a close friend of Ferdinand's brother and England team-mate Rio, admits he has left Terry to deal with the allegations in his own way.
He said: "I've dealt with it in my own way. With these things, you have to keep your counsel and get on with your job.
"I work with John closely. I speak with him all the time and work with him, as I always have. It's a difficult time for him. If it was a difficult time for me, I wouldn't want someone coming in and asking me 'what's going on, how do you feel?' so I've let him be.
"He's getting on with his job, as he always has done. In terms of Rio, I haven't spoken to Rio, but I'll remain good friends with both. It'll be an easy thing to talk about once it's all probably been dealt with in the right way.''
Lampard also understands why Terry has not felt the need to address the England squad over the issue. He said: "That's quite right as well. He's a member of the squad. You have to take the 'innocent until proven guilty' element of it.
"The manager has taken that, John has taken that, and that's how it should be taken. The players respect him as a captain of the team, as a leader and as a player. We've done the usual handshakes and 'hellos' when we met up. As simple as that.
"There has been no sense of awkwardness this week. Football is like that. A lot can be made up talking about or around a situation. But when you turn up, we're all players. We've all carried on.''
In general terms, Lampard still believes racism is a bigger problem in other countries and remembers the racist abuse directed towards Ashley Cole when England played Spain in Madrid seven years ago.
He said: "I'll answer the broader issue. It's certainly a problem that I've found happens much more in certain parts of Europe and not so much in England.
"You'll have to speak with the lads involved in it, the Ashleys or Darren Bents, to see what they've personally gone through. But, in England, there's not been a time when I've heard anything particularly racial on a pitch.
"Maybe a long time ago, I heard things in the crowd, when I was growing up in certain grounds, things that are seen as completely much more ignorant these days.
"It's much less of a problem in my eyes. That doesn't mean you can be casual to make sure it doesn't come back.''
Lampard added: "When we, as players, have played in the Spain game or certain games when this has happened, it makes a bigger camaraderie when you hear your team-mates getting that sort of abuse.
"It only brings you closer and pushes the people doing it away from you. John was supportive of Ashley then (against Spain). Of course he was. We're team-mates, we're friends. I don't know what kind of person you would be if you weren't supportive when that sort of thing happens.''