West Ham did not disclose terms but Ajax said the two clubs had agreed a transfer fee of 38 million euros, which could increase to 41 million euros with add-ons.
"We’re really pleased to add Edson (Alvarez) to our squad," said manager David Moyes after his first signing of the summer transfer window.
"The midfield area was one we were especially keen to strengthen this summer and Edson will complement the other options we have in that department.
"He’s an experienced international player, who has enjoyed great success for both club and country during his career to date".
Alvarez, who was under contract at Ajax until 2025, is a twice Dutch champion and has made 147 appearances, scoring 13 goals in all competitions, for the Eredivisie club since arriving in 2019.
He has been capped 69 times for Mexico, playing at the 2018 and 2022 World Cups.
His arrival will be a boost for the Hammers, who sold England midfielder Declan Rice to Arsenal for 105 million pounds - a record transfer between two British clubs.
