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Klopp flew into the city's John Lennon airport on Thursday afternoon and will be unveiled by the Premier League club at a news conference scheduled for 10am on Friday.
The 48-year-old waved goodbye to Borussia Dortmund in May after leading the club to two Bundesliga titles in a seven-year spell at the club.
Klopp replaces Brendan Rodgers after the Northern Irishman was sacked following the Merseyside derby draw on Sunday.
Rodgers paid the price for a poor start to the season which has seen the Anfield giants win just three of their eight matches in the league this season.
Former Chelsea manager Carlo Ancelotti, who left Real Madrid in May, was also linked with the vacancy but the Italian ruled himself out on Tuesday while talks progressed quickly with first-choice candidate Klopp.
In a short statement on Twitter the club said: "Liverpool Football Club are delighted to announce Jurgen Klopp has been appointed as the club's new manager.
"The German coach has signed a deal to take the helm at the Reds and will be presented at a press conference at Anfield on Friday morning."
Regarded as one of the top coaches in Europe, the fact he has taken on the challenge at Liverpool - who apart from one thrilling title near-miss in 2014 have slid well down the Premier League pecking order - is already being viewed by fans as a significant turning point in their fortunes.
Klopp's appointment immediately injects a feelgood factor into a club in need of it after they were humbled 3-0 at home by West Ham and only just scraped past League Two Carlisle on penalties in the Capital One Cup.
But the German will also be expected to bring success back to Anfield, and with the club just three points off the top four and only six behind leaders Manchester City there is great optimism he will be able to have a considerable impact this season.
Klopp is expected to bring with him Bosnian Zeljko Buvac, his assistant both at Dortmund and Mainz before that, and coach Peter Krawietz.
Liverpool paved the way for their arrival with a clear-out of Rodgers' backroom staff earlier in the day with first-team coach Gary McAllister, assistant manager Sean O'Driscoll - who were only brought in over the summer in an overhaul of coaching personnel - removed from their posts.
Head of performance Glen Driscoll and head of opposition analysis Chris Davies, who followed Rodgers to Anfield from Swansea in 2012, have also lost their jobs.
However, former Reds midfielder McAllister has accepted an ambassadorial role and the former Scotland international's classy act in taking training on Thursday - even though he knew it was his last - reflects well on him and the what influence he can have behind the scenes.
McAllister took the session with one member of staff - Pep Lijnders, promoted in the summer from the club's academy as a player development coach - who has kept his job.
It appears the position of head of fitness and conditioning Ryland Morgans, another Rodgers recruit from Swansea, is also safe for now.
Former Liverpool manager and now England boss Roy Hodgson offered Klopp his best wishes in his new job.
"Certainly we wish him well. I mean, it is like everything else - everybody who comes into the job has taken somebody else's job," said Hodgson.
"It is club business when they decide to change managers. It has got nothing to do with international managers like myself.
"All I can do is welcome Jurgen to England and wish him the very best of luck with his job of making Liverpool the top team that the owners would like them to be."
Hodgson also expressed the hope he and the German would enjoy a good working relationship in the coming years.
"I've been very fortunate since taking over as the England manager that I had a very good relationship, and received a lot of help and backing from Brendan Rodgers," he added.
"I am hoping that Jurgen Klopp will give me the same support and backing as we've had."
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