The Spain midfielder will join up with the European champions under his former-Barcelona coach Pep Guardiola.
Manchester United were strongly linked with Thiago after it was revealed that the midfielder had a £15m release clause in his contract due to a lack of playing time at the Nou Camp.
But it seems David Moyes has missed out on the talented youngster, after Bayern Munich chairman Karl-Heinz Rummenigge confirmed the capture.
“Thiago Alcantara was the great desire of our new coach Pep Guardiola,” said Rummenigge. “Thiago is a fantastic player with great perspective, which will strengthen Bayern.”
Some would argue the German treble winners don’t need much strengthening after a season in which they dominated at home and abroad.
Thiago will join Bastian Schweinsteiger, Javi Martinez, Thomas Muller, Franck Ribery, Arjen Robben, Xherdan Shaqiri and Toni Kroos in one of the most imposing midfields in world football.
The German champions claim they will pay £17.3m up front to Barcelona, with Thiago forfeiting some money. The two clubs will also play a friendly in the next four years, with the proceeds counting towards the total fee.
The Spain under-21 midfielder was the star of the national team at this summer’s European under-21 Championships, scoring a hat-trick in the final against Italy.
But he moves to Bayern Munich hoping to secure the first-team minutes necessary to strengthen his case for inclusion in Vicente Del Bosque's Spain squad to defend their World Cup next summer.
He will complete a medical in Munich later this week, before reportedly signing a four-year contract with the club.