Terry has been in the spotlight after he is 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 champions Spain in Saturday evening's friendly at Wembley with Terry not under consideration to start the game for footballing reasons. 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."