The 20-year-old, who is in Brazil's Olympic squad for the Games in London, arrives at Stamford Bridge from Brazilian side Internacional.
"Chelsea Football Club is delighted to announce the signing of Oscar," the European champions announced on their website.
No transfer fee or contract details were given. British media reports said the deal was worth approximately 25 million pounds.
The attacking midfielder, whose full name is Oscar dos Santos Emboaba Junior, began his career at Sao Paulo.
He has represented his country at all levels of international football from Under-15 to Under-20, and has earned six caps for Brazil's senior side.
In 2011 he attracted the attention of several clubs when he scored a hat-trick in Brazil's 3-2 win over Portugal in the final of the Under-20 World Cup.
He is expected to make his Olympic debut on Thursday when Brazil face Egypt in Cardiff.
Oscar's signing adds to Chelsea's spending in the off-season. They have already acquired Belgian Eden Hazard from Lille, his brother Thorgan from Lens and German Marko Marin from Werder Bremen.
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