Brendan Rodgers has moved to strengthen his forward line by signing the Kirkby-born England international, who was released by the Reds as a schoolboy back in 1997.
As reported by Goal on Thursday, the Anfield outfit made a shock move for the 32-year-old forward as it looked to supplement its first-choice attacking line of Luis Suarez and Daniel Sturridge with proven Premier League quality.
Lambert was released by Liverpool as a 15-year-old back in 1997, but has since risen up from the fourth tier of English soccer to seal a fairytale return to his boyhood club, which will be playing Champions League soccer once again next season.
"I can't believe it," he told the club's official website. "I've loved this club all my life. I left here 17 years ago — and I haven't stopped loving it since. I have always dreamt of playing for Liverpool, but I did kind of think the chance of playing for them had gone. I didn't think the chance would come.
"I know how big Liverpool are — and it means everything to me — but I know what is important; I know it's what I do on the pitch and the minutes I play. I know that's what matters, and that's what I'll be focused on."
The transfer represents a significant profit on the 1 million pounds the Saints paid to Bristol Rovers to sign Lambert in 2009, a fee he quickly repaid by guiding the south coast club back to the Premier League.
Last season was the first campaign in which Lambert was not the club's top scorer since he joined, having led Southampton's scoring charts in each of the four previous seasons.
Lambert netted 106 goals in 207 league games during his time at St. Mary's Stadium, and easily made the step up to the Premier League, scoring 15 times in his maiden campaign — a tally that made him the joint top scoring Englishman.
His performances led to international recognition and, after scoring against Scotland in his debut back in August, has gone on to earn a place in Roy Hodgson's World Cup squad, with the move to Liverpool sealing an incredible year for Lambert.