The prolific attacker has made the decision to continue his career in Serie A and joins former Real Madrid team-mates Jose Callejon and Raul Albiol
The Partenopei were in the market for a new striker following the €63 million sale of Edinson Cavani to Paris Saint-Germain and quickly earmarked Higuain as the ideal replacement, with the club's president Aurelio De Laurentiis revealing the deal on his official Twitter page.
He tweeted: "This morning we have signed the contract with Higuain."
The 25-year-old had previously been linked with Juventus and Arsenal but has now signed a five-year deal with Napoli instead, becoming the eighth most expensive incoming Serie A transfer of all time.
Higuain came through the ranks of the River Plate youth academy and joined Madrid in January 2007 for a reported fee of €12m and has since netted over 100 Liga goals for the Spanish giants.
"Real Madrid announce that the player Gonzalo Higuain has been transferred to Napoli," read a statement on the club's official website. "The club want to show their appreciation for all his years of dedication and professionalism and wish him luck in this new stage."
The prolific attacker becomes the third Blancos player to make the move to the Stadio San Paolo side this summer after the arrivals of Jose Callejon and Raul Albiol.
Napoli have also secured the services of goalkeeper Rafael from Santos and Dries Mertens from PSV, with Pepe Reina expected to join on a season-long loan from Liverpool soon after successfully completing a medical earlier this week.