The 21-year-old has had plenty of interest this summer - Leicester and Southampton were among those to make official approaches - but has opted to join the west London rivals of his former club Fulham.
Brentford will pay a fee rising to £27.5m and Liverpool have retained a 17.5 per cent sell-on clause if the Portugal-born star moves on again.
Former club Fulham, where he made his name before joining Liverpool in 2022, are set for a decent windfall from the deal. They will get 20 per cent of the profits made between his £5m move to Liverpool and total £27.5m sale.
Carvalho told reporters during the Reds’ United States tour of his desire to stay at Anfield but new head coach Arne Slot had instructed him his best position was as a left winger despite the player wanting to be a No 10.
Brentford have agreed a deal worth up to £27.5m to sign Liverpool youngster Fabio Carvalho
He scored twice on the three-game tour and has started every match of pre-season but was unlikely to get regular game-time once the likes of Cody Gakpo and Luis Diaz return to full fitness after their holidays.
Carvalho spent last season on loans at RB Leipzig and Hull City. He featured prominently for the Reds at the start of the 2022-23 season and scored some decisive goals but never really stamped his authority on the starting XI and was always likely to leave this summer.
Liverpool are continuing discussions with Real Sociedad midfielder Martin Zubimendi.