The centre-back's deal with former club Manchester City expired yesterday and the club have confirmed the 32-year-old put the finishing touches to his move to Anfield on their first day of pre-season training.
An agreement had been in place with Toure for some time but he could not formally sign until the opening of the transfer window.
"This means a lot to me. Firstly, I'm joining one of the best clubs in England," Toure told liverpoolfc.com.
"When I left City it was important for me to stay in England because it's the best league - and to join Liverpool is massive for me.
"I chose Liverpool because of the history and because of the spirit of the team and the people here."