As revealed by Goal in July, the Reds youngster had offers from the Blades and Championship rivals Norwich but opted for a move to Sheffield, with the Championship club announcing they had won the race for the 18-year-old on Wednesday.
Blades boss Chris Wilder said of Woodburn: "Ben is a great signing for us, he is an exciting player with undoubted quality.
"He's been involved with Liverpool throughout their pre-season and I'm delighted they've trusted us with one of their outstanding young prospects, who is a full international as a teenager.
"It's his first loan move and I'm sure it will be a great one for all parties.
"He makes goals and score goals with both feet, he can play in a couple of attacking positions and gives us flexibility at the top of the pitch."