The Rangers manager was in the peak of his powers, leading the Reds to a Champions League trophy in the same year.
But when the Blues came calling, Gerrard had his head turned and a transfer was on the cards.
Considering the rivalry between the two and the affiliation that the midfielder had with the Anfield club, a deal seemed preposterous.
However, it emerged that Gerrard had handed in a transfer request in a bid to move to west London.
Liverpool legend Steven Gerrard nearly signed for Chelsea (Image: GETTY)
A transfer never went through, in the end, and the 40-year-old has admitted Rafa Benitez came into his thinking - insisting he thought the money would be used to give Liverpool a massive financial boost.
In June 2020, he told Gary Neville on Sky Sports Soccer Box: "I regret the little bit of flirting back then and how that all blew up.
"The fact is I didn’t know whether I was coming or going with Rafa at the time.
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“Rafa was having conversations with me like ‘I know your agent is talking to Real Madrid and Chelsea’.
"I got a paranoid feeling at the time that Rafa would have taken money to try and build Liverpool on.
"Chelsea bid £37.5m. At the time, massive amounts of dough but what would you get for that now?”
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Gerrard admitted Benitez had an impact (Image: GETTy)
Neville joked back: “Half a Fred!”
Gerrard added: "[Jose] Mourinho was a massive part of that. A lack of maturity on my part allowed me to think about it and flirt with that idea a bit.
"But now I have no regrets at all because Liverpool are the club I love - and that’s the way it should be.”