The 30-year-old, who has over 100 international caps, is delighted to join the Merseysiders.
“I’m really honoured to be part of this amazing club, this amazing team,” Klavan told the club's website.
“It’s hard to put it into words, because it’s been a dream of mine for 22 years to come to the Premier League and be a part of this amazing club, Liverpool.
“The Premier League is the most attractive league in the world and you always have amazing players here. This is the home of football.”
Klavan is Reds manager Jurgen Klopp's fifth summer signing after Loris Karius, Joel Matip, Sadio Mane and Marko Grujic.