The 19-year-old will officially move to Anfield on July 1, following the expiry of his contract with the newly-promoted Cottagers.
He has penned a five-year deal, with Liverpool paying an initial £5m ($6.2m), with a further £3m ($3.7m) in performance-related add-ons. The Reds have also inserted a 20 percent sell-on clause in the deal.
How did Liverpool sign Carvalho from Fulham?
It was agreed that he would remain at Fulham for the remainder of the season, but Liverpool were unable to complete the necessary paperwork in time for the 11pm deadline and so the deal was not finalised.
Despite this, Anfield sources were always confident Carvalho would end up on Merseyside. Michael Edwards, the outgoing sporting director, and Julian Ward, his replacement, have worked hard to smooth relations with Fulham following the acrimonious departure of Harvey Elliott to Liverpool in 2019.
Ward in particular has a strong relationship with Fulham manager Marco Silva and chief executive Alistair Mackintosh, and Liverpool were said to be impressed by the way in which Mackintosh and Tony Khan, the Cottagers' vice-president, have handled negotiations.
Relations were helped by the deal which took Harry Wilson to Craven Cottage last summer, and Liverpool allowed Neco Williams to join on loan at the end of January. Both played big roles as Silva’s side secured promotion to the Premier League.
Where will Carvalho fit in at Liverpool?
Carvalho has already made an impact in the Premier League, making four appearances at the back-end of the 2020-21 campaign and scoring once.
This season has been his real breakthrough. He has been a regular in Silva’s side, netting 11 times in 38 games in all competitions, earning a first call-up to the Portugal U21 squad in the process.
He is versatile enough to play in just about any position across the forward line, though Liverpool sources believe his best roles are either off the left flank or as a No 10.
He is also comfortable playing wide on the right, as a No 9 or even in a midfield three, although the word from Anfield is that he will play as part of the forward line, at least to begin with.
He is viewed as someone with huge potential, hence the interest from clubs such as Manchester City, Borussia Dortmund and Paris Saint-Germain, among others.
He has already, with Fulham’s permission, visited the AXA Training Centre to complete a medical and meet with Jurgen Klopp and his coaching staff, and is understood to be already preparing for pre-season, when he will link up with his new team-mates.
Importantly, Carvalho qualifies for 'home-grown' status in the Premier League, having been at Fulham since the age of 12.
He will form part of an exciting core of emerging young players at Anfield, joining the likes of Elliott, Trent Alexander-Arnold, Curtis Jones, Ibrahima Konate, Kaide Gordon and Tyler Morton, all of who are 23 or younger.
The Reds are also signing Celtic teenager Ben Doak this summer, and hope to land 18-year-old right-back Calvin Ramsay from Aberdeen.