Mac Allister, 24, joins the Merseyside club as Jurgen Klopp's first signing ahead of an expected busy transfer window. The club are looking to improve upon their fifth-place finish in the 2022-23 season.
Sources told ESPN that the midfielder has put pen to paper on a contract until 2028 at Anfield.
The Argentina midfielder was a key figure for Brighton, contributing 12 goals and three assists in a season that saw the club secure Europa League qualification for the first time.
Mac Allister also impressed at the 2022 World Cup in Qatar, starting in all but one of Argentina's matches as they won the competition for the first time since 1986. The midfielder scored in his side's 2-0 group stage win over Poland.
"It feels amazing. It's a dream come true, it's amazing to be here and I can't wait to get started," Mac Allister told the club's website.
"I wanted to be in [from] the first day of preseason, so it's good that everything is done. I'm looking forward to meeting my teammates.
"It was a fantastic year for me -- World Cup, what we achieved with Brighton -- but now it's time to think about Liverpool and try to be a better player and a better human being every day."
Sources told ESPN in April that Liverpool would end their lengthy pursuit of Borussia Dortmund midfielder Jude Bellingham and instead dedicate funds towards a rebuild of the squad after missing out on Champions League football for the first time since the 2015-16 campaign.
The signing of Mac Allister is the first act under new sporting director Jorg Schmadtke, who joined the club having previously worked with Wolfsburg, Cologne and Hannover.