The fee, a widely reported 35 million pounds, means the 22-year-old Carroll cost more than Manchester United paid Tottenham Hotspur for Dimitar Berbatov and Manchester City spent to bring Robinho from Real Madrid.
However, it was eclipsed by Chelsea later paying a reported 50 million pounds for Liverpool's Fernando Torres - a deal that was completed minutes after Liverpool confirmed Carroll had signed for a "record transfer fee".
"Andy Carroll has tonight completed his transfer from Newcastle United to Liverpool FC and signed a five-and-a half-year-deal that will keep him at Anfield until 2016," Liverpool said in a statement on their website.
Carroll's move to Liverpool, who also finalised the signing of Uruguay's Luis Suarez from Ajax as new manager Kenny Dalglish re-models his squad, paved the way for the Torres sale.
Newcastle had already turned down two bids from Liverpool for Carroll but "reluctantly" agreed to the player's transfer request earlier on Monday before he travelled to Merseyside for a medical. He will wear the number nine shirt at Liverpool.
The powerful Carroll, born in the Newcastle heartland of Gateshead, made his first-team debut in 2006 and has developed into one of the Premier League's most feared frontmen, netting 11 times in the league this season.
His muscular game, touch and finishing ability earned him a call-up to Fabio Capello's England squad in November when he made his international debut against France.
Carroll's departure is a huge blow to Newcastle and their fans who have given the pony-tailed "No.9" cult hero status after his 19 goals last season helped Newcastle regain their place in the Premier League.
He began this season with a hat-trick in a 6-0 home victory over Aston Villa.
Liverpool fans could have to wait a while to watch Carroll in action as he is currently suffering from a thigh injury that has sidelined him since December 28.
