The midfielder, 24, is hoping to play a major role in Wanderers' promotion push and get them back in the top flight next season.
Spearing spent last season at the Reebok on loan and quickly became a fan favourite, prompting manager Dougie Freedman to make him a permanent fixture at the club.
Having played at Liverpool for his entire career, Spearing made the difficult decision to leave the Anfield club after struggling to hold his place in the first team.
He said: "It was tough. I've been there since I was seven and not known anything else.
"But at 24, the regular first-team football wasn't coming and it was time for me to move on and look for that.
"The reception I have had from the fans from the moment they knew I'd signed has been magnificent. I want to pay them back on the pitch.
"Where this club and these lads want to be is back in the Premier League, we massively want it this season.
"We've got to now gel quickly as a team and get points on the board.
"Hopefully that will mean myself and the lads getting this club back to where we belong."