Babel, 20, will sign a five-year contract after agreeing personal terms and passing a medical on Merseyside.

Ajax had earlier revealed they had agreed a fee of £11.5million for the player.

"Liverpool have agreed terms with Ajax and Ryan Babel himself and the player will sign a five-year-deal on Friday," said a statement on the club's website, www.liverpoolfc.tv.

Benayoun completed his protracted transfer by committing himself to the club until 2011.

The two Barclays Premier League clubs spent several weeks haggling over the value of the 27-year-old, who had held off signing a new contract at Upton Park once he learned of Liverpool's interest.

However, a fee - believed to be £5million - was finally agreed yesterday and the formalities of the deal were completed with the player today.

Manager Rafael Benitez has been looking to add more creativity to his side and, having sold Luis Garcia, viewed Benayoun as an ideal replacement.

"I first saw him play for Racing Santander in La Liga when he was a really good player, but when he first came to England we were watching to be sure he could adapt to a different style of football," Benitez said of the Israel international.

"It's clear he's done this very well at West Ham. Liverpool fans will remember how he played in the (2006) FA Cup final against us when he was outstanding.

"We thought then this was a player who is capable of stepping up to a higher level."

Benitez revealed that once the player was made aware of Liverpool's interest he needed no persuading to move to Anfield.

"He was offered a big new contract at West Ham and received offers from a lot of other clubs offering him more money but Yossi's message was always the same," Benitez told the club's website.

"He said he was desperate to only join Liverpool because this was his dream. When Rick (Parry, chief executive), the Americans (co-owners George Gillett and Tom Hicks) and I spoke about the player, we all agreed this is the kind of attitude we and our supporters really like.

"When you have quality players with his ability showing so much passion to play for your club, it's really good for the team."

Benitez has been busy in the transfer market earlier than usual this summer as he tries to assemble a squad capable of making a sustained challenge for the Premier League title.

Having agreed a deal for forward Andriy Voronin, he broke the club's transfer record to bring Atletico Madrid striker Fernando Torres to Anfield for £20million and the arrival of Benayoun and Babel will almost complete his spending.

The Spaniard continues to be linked with Manchester United's Argentina defender Gabriel Heinze.

Babel, who briefly returned to Holland to say his farewells, admitted leaving Ajax was a wrench but he was excited about a move to Anfield.

"I am very happy with it," he said of the transfer.

"I am now only at Ajax to say goodbye to everyone, and I must say that's quite difficult.

"I think I will miss the fans, the ones that have always supported me, the guys (Ajax team-mates) of course and the coach.

"I certainly leave Ajax with pain in my heart. I will come to Amsterdam quite often, and then I will come to visit the club."

Babel revealed he took little persuading to make the move to Anfield.

"I listened to what they had to say and I got a great feeling about the club," he told Ajax TV.

"I have made a choice with my heart. The coach (Benitez) has big plans for me."