The decision was announced by Liverpool after they agreed compensation with Barclays Premier League rivals Fulham.
The 62-year-old takes over at Anfield on a three-year contract, 28 days after the departure of Rafael Benitez, who parted company with the Reds after a disappointing season saw them finish seventh in the table.
first choice
Hodgson, a former Inter Milan and Blackburn Rovers manager, was Liverpool's first choice despite a host of other names being mentioned.
Former player and manager Kenny Dalglish, who was part of the selection process with managing director Christian Purslow and is currently an ambassador for the club's academy, had expressed an interest in returning to a role in which he enjoyed great success in the late 1980s and early 1990s, but was overlooked for the post.
Hodgson's name had been linked with England after their disappointing World Cup campaign under Fabio Capello, but negotiations were already at an advanced stage with the Merseysiders and the deal has now been completed.
He told the club's official webiste: "This is the biggest job in club football and I'm honoured to be taking on the role of manager of Britain's most successful football club. I look forward to meeting the players and the supporters and getting down to work at Melwood."
Hodgson has less than a month to get to know his players and prepare them for a Europa League third qualifying round first-leg tie on 29th July.
He is at least familiar with the prospect, having guided Fulham from that starting point all the way to the final this season, eventually losing to Atletico Madrid.
Carr : Will Liverpool win the title for next season with this new manager? Let us see what happens....
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