The 24-year-old is the big signing Liverpool fans have craved since selling last season's top scorer Luis Suarez to Barcelona in July but Balotelli's famous on and off field antics may not sit well with some at Anfield.
The former Manchester City player returns to England after only a season and a half at boyhood club Milan, who are continuing to cut costs to the dismay of supporters.
"I'm very happy. We've been talking about coming here and now I'm happy to be here," Balotelli told the club's official website (www.liverpoolfc.com).
"Liverpool are one of the best teams here in England and the football is very good here. It's a great team with young players, and that's why I came here."
The transfer fee was not disclosed but media reports have speculated the amount is around 16 million pounds($26.5 million)
Liverpool surprised pundits by finishing runners-up to City in the Premier League last season after years of woe and have recruited a host of players with the cash received for Suarez but Balotelli is the biggest name so far.
England World Cup players Adam Lallana and Rickie Lambert arrived from Southampton along with Dejan Lovren while Emre Can and Lazar Markovic are among others to have signed.
Balotelli's return to England is something of a surprise given his profound wish to quit City for Milan in January 2013 but economic realities dictate policy at Silvio Berlusconi's once mighty club these days.
Other top players such as Zlatan Ibrahimovic have been sold to balance the books at the seven-times European champions, who could only finish eighth in Serie A last term and start the season under novice coach Filippo Inzaghi in near disarray.
Their first Serie A encounter is at home to Lazio on Aug. 31 when the San Siro is likely to let Berlusconi know in no uncertain terms about their unhappiness over Balotelli's sale.
Liverpool, back in the Champions League this term unlike Milan, visit Manchester City in domestic action later on Monday.
