The 21-year-old playmaker has signed a four-year contract at St Mary's with the Barclays Premier League club revealing that a verbal agreement was in place last Friday.
A statement on the Saints' official website read: "Saints are pleased to confirm the signing of Uruguayan international Gaston Ramirez from Italian side Bologna."
Saints manager Nigel Adkins added: "A lot of hard work has gone in from the football club with a lot of negotiations behind the scenes to get this deal done.
"Great credit to everyone because we have a young, exciting talent joining us who is one of the best around.
"The chairman has gone and backed this deal big-time with the financial outlay, and what we have got is one of the most exciting prospects in world football coming to St Mary's.
"There is a lot of ambition at the football club and we are all delighted that Gaston is going to come and join us."
Southampton have also signed young goalkeeper Cody Cropper after the American impressed during a trial.
The 19-year-old, who had spent two years with npower Championship side Ipswich, has been training with the Southampton youth team for two months.
The USA Under-20 international showed enough during his short time with the Saints to earn a two-year deal with the club.