Hyypia passed a medical earlier today and will join the German side for pre-season training.
The Finnish international proved to be an astute purchase when he was bought for a meagre £2.5 million from Dutch club Willem II in 1999.
He went on to help the Reds lift a Champions League title, a UEFA Cup, two UEFA Super Cups, two FA Cups and two League Cups.
The club's official website hailed the impact of Hyypia. "History will judge the Finn to be one of the club's shrewdest pieces of business - and possibly the best pound for pound signing to arrive at Anfield," it declared.