The 20-year-old defender has signed a four-year contract at the club where he spent the second half of last season on loan, moving for an undisclosed fee, reported to be in the region of £2.7 million ($3.3m).
Oxford became West Ham’s youngest-ever player when he made his senior debut in the Europa League in July 2015, at just 16 years and 198 days.
“I am very happy that a permanent change to Augsburg has worked out,” Oxford told the club’s website.
“I have felt very comfortable in the city and at the club for the past six months, and now I want to take another step in my development in the Bundesliga.”
Oxford announced himself as one of English football’s brightest young stars back in 2015, helping his side to a 3-0 win over Lusitanos before making his Premier League debut the following month.
He became the second-youngest player to start in the Premier League after Jose Baxter, famously keeping Arsenal’s Mesut Ozil under wraps in a 2-0 win for the Hammers, then managed by Slaven Bilic.
Since then, he has spent more time away from the club than in London, first in the Championship with Reading before two spells at Borussia Monchengladbach.
Having moved to Augsburg at the end of the January transfer window, he did enough in nine appearances to convince his new side he was worth bringing in on a permanent deal – despite his most recent outing being the 8-1 thrashing by Wolfsburg on the final day of the season.
Stefan Reuter, Augsburg’s managing director, said: “We are glad that we have been able to sign a player in Reece who already knows the club, and knows the values we live by in Augsburg.
“We are convinced that he will strengthen us in the years to come.”
Oxford could have a task on his hands at the beginning of the season. Following a final friendly with Bologna on Saturday and a DFL-Pokal trip to Verl, Augsburg face a daunting fixture on the opening day of the Bundesliga campaign as they travel to Borussia Dortmund.
Their first home game the following week sees them welcome top-flight newcomers Union Berlin to the Augsburg Arena.