La Liga - Fabregas finally returns home to Barca
Both clubs announced that an agreement had been struck late on Sunday night on their websites and Fabregas completed his medical tests on Monday.
It is reported Barcelona have paid £35 million to sign the midfielder, 24, who has a release clause of 200 million euros (£175 million) written into his new contract and is tied to his boyhood club until 2016.
He has been presented to the media and around 30,000 Barcelona fans who entered Camp Nou to greet the club's new signing.
A Barcelona statement read: "Cesc has signed his contract which ties him to Barcelona until 2016. The buy-out clause is 200 million euros."
Fabregas told a press conference: "I have waited a long time for this moment. It's a very special day.
"I know that many of you were disappointed when I left but I am here to take up the greatest challenge of my life. After eight years away I hope to leave you all with many great memories."
Fabregas came through Barcelona's youth academy at the same time as World Player of the Year Lionel Messi before joining the North London club in September 2003.
He became Arsenal's youngest first-team player in the following month when he made his debut against Rotherham United in the League Cup aged 16 years and 177 days.
He also became Arsenal's youngest goalscorer when he netted against Wolves in a 5-1 win that December.
Arsenal have won only one league title (2004) and one FA Cup (2005) since he joined the club, while Barca have claimed three Champions League titles, five Spanish leagues and the Copa del Rey.
Fabregas thanked Arsene Wenger for the impact he had on his career during his time at Arsenal.
“Wenger is a special man," he said. "For me, he will be always a second father, who gave me all what I have in the world of football. I’ll never have enough words to say thank you to him. In Spain, he has not a good image, is my opinion but I know that if I’m here today in Barcelona is thanks to Wenger.
"My biggest regret is that we won only one FA Cup and the biggest regret I will have in my career is that I did not lift a trophy as an Arsenal captain, but I am sure they will be a strong team again.
"I will always be an Arsenal fan because what they have done for me is unbelievable and I will never forget it."
At international level, Fabregas has struggled to hold down a regular starting place in a Spanish team with a rich crop of midfielders, including Barcelona trio Xavi, Andres Iniesta and Sergio Busquets and Real Madrid's Xabi Alonso.
He also played the ball through to Iniesta for his dramatic winning goal in last year's World Cup final.
Wenger challenged his Arsenal squad to show life will go on for the Gunners following the sale of their captain.
"What is important is to focus on our targets and we wish good luck to Cesc, who is a great player, one of the best players in the world. Life goes on and we want to show we have the needed desire and strength to deal with the situation," Wenger told a news conference ahead of Tuesday's Champions League play-off first leg against Udinese.
"Yes, we lost a world-class player and we are sad about it. We did fight to keep him, but in the end we have as well to respect the desire of the player.
"This club is 125 years old this season and many big players have left the club and the club went on. We want to show that we have the strengths and unity to fight as we ever did at this club."