The France international passed a medical on Tuesday and will now become manager Brendan Rodgers' fifth signing of the close-season.
Cissokho made 18 appearances for Valencia in La Liga last season - his first after moving from Lyon - but admitted that he could not turn down the chance to move to Anfield.
"I'm very happy to be here," he told the club's official website. "I think we have a great team and great fans and together we can achieve big things.
"It's going to be a great experience to be able to rub shoulders with the club's top-quality players. I have experience in the game, but coming here there will still be lots of things to learn and discover as I work with everyone every day.
"I can learn from my new manager, get to know the new style of play here, familiarise myself with different opposition teams and learn the language.
"It's going to be a great experience for me, and of course playing for the club for the first time is something I'm excited about."
Cissokho - who will provide competition for Jose Enrique in defence - has one cap for France.
The 25-year-old will now hope his performances for Liverpool can help him force his way into Didier Deschamps' plans ahead of the 2014 World Cup.
Get the best features, fun and footballing frolics straight to your inbox every week.
Thank you for signing up to Four Four Two. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.