Arsene Wenger hailed Alex Oxlade-Chamberlain as a player of rich potential after Arsenal finally prised him away from Southampton.
Oxlade-Chamberlain, 17,completed a medical on Monday and agreed personal terms in a deal described by the Gunners as a "long-term contract".
The final fee will be £15million with £12million of that sum to be paid up front.
"We are delighted that Alex has decided to join us," Wenger told the club's official website, www.arsenal.com. "He is an exciting young player who will provide us with creativity and offensive quality.
"Alex is a versatile player who can play in a number of positions. He can play as an attacking centre midfielder, or wide left and right.
"Alex is a perceptive passer of the ball and has a great understanding of the game and looks to be a very good team player."
Oxlade-Chamberlain has yet to compete at a higher level than League One but his signing will still be viewed as a coup for Arsenal, despite the size of the transfer fee.
Manchester United and Liverpool also expressed interest in the Southampton academy product, but the Gunners appear to have edged their rivals on this occasion.
"It is one of the biggest deals in Championship history, which sees Saints' previous transfer records blown out of the water," read a statement on Southampton's official website www.saintsfc.co.uk.
"The deal for the midfielder, who had made it clear he saw his future away from Southampton, was done with Saints in the driving seat for the duration of the protracted negotiations and the transfer was completed on our terms."
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