The 29-year-old becomes the Hammers' fifth summer signing after agreeing a four-year deal at Upton Park, following a troubled two-year spell with the Reds.
The England international passed his medical at Upton Park on Tuesday morning and becomes Sam Allardyce's fifth summer signing, alongside the likes of Andy Carroll, who also arrived from the Reds this summer.
The 29-year-old looked to have fought his way back into Brendan Rodgers' first-team plans at Anfield following a disappointing start to his Liverpool career, but opted to join the Hammers for the assurance of a regular Premier League starting spot.
"I'm very excited," he told the club's official website. "It's a great opportunity for me being here, it's a great club and I'm really excited to get going.
"I'm ready and I'm fit for the first game against Cardiff City. I've played a decent few games for Liverpool in preseason, so there will be no problems on that front. It's all happened quickly, but I'm really excited and hoping to play a part on Saturday."
Downing moved to Liverpool from Aston Villa for 20 million pounds in July 2011 and made 91 appearances for the Reds, scoring seven goals.