The 20-year-old was born in London but has represented Portugal at youth level.
Ilori told Liverpool's official website: "It feels great being a Liverpool player - coming to the Premier League has always been a dream for me.
"I'm going to try and achieve everything I can. I want to play as much as possible and we'll see what the future holds. I will give my all and try my best to help the team."
"I know the history of the club and the Premier League is the best league in the world, in my opinion," continued Ilori. "Liverpool, have a great team and I think it's the place for me to be at the moment.
"I know there have been some great teams here in the past and the club has won a lot of trophies and I want to be a part of it."