Alcantara has long been expected to join Premier League champions Manchester United, but has now instead joined the Champions League winners.
The youngster will link up with former Barcelona boss Pep Guardiola at Bayern Munich.
Bayern Munich have agreed to pay a fee of 25 million euros for the Spain Under-21 midfielder.
Thiago will have a medical in Munich in the next few days before signing a four-year contract with Bayern, the club confirmed on their website.
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Liverpool have unveiled their new home kit for next season, sticking with the hugely popular retro styling of the current shirt.
The reputation of the Premier League means it is the most popular and one of the most watched leagues in the world.