The 23-year-old was thought to be on his way out of the Stade Gerland after claiming his time there was "finished" and expressing his "irrevocable" desire to leave because of a disagreement with president Jean-Michel Aulas.
But following crisis talks this week, the pair seem to have patched up their differences and Fred now seems set to prolong his stay with Les Gones.
"We can say that this affair, which was not really one from our point of view, is closed," club official Marino Faccioli told L'Equipe.
Ligue 1
Gravgaard to join Nantes
06/07/2008 AT 16:26
Fred has been in Brazil over the summer recovering from a knee injury and he will now return to France just days after Sylvain Wiltord completed his move to Rennes.
The pair are believed to be at loggerheads after a major bust-up at the end of last season.
Ligue 1
Lyon and Marseille dispute Ben Arfa deal
30/06/2008 AT 12:50
Ligue 1
PSG making Digard "go mad"
30/06/2008 AT 12:01