The goalkeeper joined Freiburg as a 10-year-old in 2000 and made his first-team debut in the 2009-10, however his 14-year association with the club has come to an end.
Baumann made 131 top-flight appearances for Freiburg after coming through the club's youth system.
However, the 23-year-old will now continue his career with Hoffenheim and is eagerly anticipating a fresh challenge.
"After 14 years at SC Freiburg, I'm really looking forward to a new environment," he told Hoffenheim's official website.
"Hoffenheim has an offensive style in the league. I will try to be a safe backing, so this style of play can be further developed. I am looking forward to this challenge."
Director of football Alexander Rosen welcomed the arrival of a goalkeeper boasting plenty of experience at a young age.
"Oliver Baumann will provide us with his experience from more than 130 Bundesliga games," said Rosen.
"We are sure that Oliver fits perfectly as a type in our young team. We are very happy that he has chosen the TSG and our way. "
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