The deal includes an upfront fee of £100 million, with an additional £16 million in potential add-ons.
This transfer breaks Liverpool's previous record, which was set when they signed forward Darwin Nunez from Benfica in 2022.
It could also surpass the British transfer record of £115 million, previously held by Chelsea for Moises Caicedo in 2023, if the add-ons are achieved.
Wirtz expressed his excitement and happiness about joining the club, saying: "I'm very happy and proud. It's finally done, and I'm really happy. I'm excited to have a new adventure in front of me."
He also mentioned that he was attracted to Liverpool's Premier League and the challenge of playing in a new league.
Wirtz has quickly established himself as a top player, making his debut for Leverkusen at the age of 17 and blossoming into a superstar.
During the 2023/24 season, he scored 16 goals and provided 15 assists, helping Leverkusen finish second in the Bundesliga and reach the Champions League last 16.
He was instrumental in Leverkusen's historic Bundesliga title win under Xabi Alonso, scoring 18 goals and providing 20 assists across 49 games.
Wirtz has also represented Germany 31 times, scoring seven goals since making his debut in 2021.
He expressed his ambitions for the new season, stating: "I want to win everything every year. We have to do our work, and I have to make my work. In the end, we want to be successful."
Wirtz is Liverpool's second signing from Leverkusen this summer, following the arrival of full-back Jeremie Frimpong earlier.