The Liga champions have long been in the hunt for the Croatia international's signature but were initally rebuffed last month.
Despite reported interest from the likes of Premier League pair Tottenham and Arsenal, Halilovic will move to Camp Nou on a five-year deal - starting life at Barca in their reserve side.
Halilovic joins for an initial fee of €2.2 million, with the amount set to rise based on a number of clauses.
The attacking midfielder is the youngest international to play for Croatia and has featured in the UEFA Champions League with Dinamo.
This campaign has seen Halilovic cement a regular place with the Croatian top-flight holders and leaders.
Speaking to Barca's website, Halilovic said: "I am delighted and it’s hard to find the words to describe how I feel.
"Thank you very much to Dinamo, who will always be my first love and the club where my dreams started coming true.
"I would like to thank all the Dinamo youth coaches and all of the fans.
"Of course, Barcelona is something special, I have loved the club since I was a kid and it will be an honour to be able to play for Barca.
"But before that, I want to win the double with Dinamo and then I'll start concentrating on my new club."
