كتب : Hatem Maher
The deal is believed to be in the region of £6 million ($11.1 million), English media reported.
"I'm over the moon. I've dreamt about this since I was a little boy so to actually be here and to be able to wear a Liverpool shirt and play at Anfield is a dream come true," Pennant told Liverpool's official website.
"I always wanted to come to Liverpool. This is the only club I would have wanted to sign for," he added.
The new acquisition comes as a boost for Liverpool coach Rafael Benitez who was looking for a right-sided midfielder.
The 23-year-old could make his debut in Liverpool's friendly game against Germany's Kaiserslautern on Saturday.
Pennant is Liverpool's fifth signing in the off-season following the arrival of Craig Bellamy, Mark Gonzalez, Fabio Aurelio and Gabriel Paletta.