The right-back has reportedly joined on a two-year deal, with the Premier League side able to permanently purchase the player during the first season, and will now compete for a place with Glen Johnson and Jon Flanagan.
Manquillo, who has also been linked with a move to Arsenal despite their purchase of Mathieu Debuchy, has hailed Liverpool as one of Europe's biggest clubs and is looking forward to continuing his progression.
"I'm very happy to have signed for a club like Liverpool. I think it's one of the biggest in Europe. Any footballer would want to come and play here," Manquillo told the club's official website.
"When they tell you Liverpool want to sign you, I think like any player, you are going to be absolutely amazed and you don't think of anything else than going straight there.
"It's a team that nowadays, as I said before, any player would want to be a part of."
The Spain youth international becomes Brendan Rodgers's seventh summer signing after Emre Can, Adam Lallana, Rickie Lambert, Dejan Lovren, Lazar Markovic and Divock Origi.