The Blues said the 21-year-old has agreed an eight-year contract at Stamford Bridge, with a club option for a further year, after Chelsea beat off competition from Liverpool for his signature.
It is the second time Chelsea have broken the British transfer record in seven months after spending £107 million on Enzo Fernandez in January.
It was never in doubt. ?? pic.twitter.com/Fr11B6Lclp
— Chelsea FC (@ChelseaFC) August 14, 2023
Impossible not to smile. ?? pic.twitter.com/k6Vn14G4za
— Chelsea FC (@ChelseaFC) August 14, 2023
Liverpool had a £110 million offer accepted on Friday after Brighton had set a deadline for bids.
But Caicedo turned down the opportunity to join the Reds to pursue a move to the Blues.
"I am so happy to join Chelsea!" Caicedo said in a club statement.
"I am so excited to be here at this big club and I didn't have to think twice when Chelsea called me, I just knew I wanted to sign for the club.
"It's a dream come true to be here and I can't wait to get started with the team."
He's Chelsea! ? pic.twitter.com/RcJHJtcHTm
— Chelsea FC (@ChelseaFC) August 14, 2023
Chelsea will reportedly pay an initial £100 million with a further £15 million due in performance-related bonuses.
The deal represents another huge profit for Brighton, who signed Caicedo from Independiente del Valle for just £4 million in 2021.
However, he has only been a regular starter for the Seagulls over the past 18 months after spending the first half of the 2021/22 season on loan at Belgian side Beerschot.
Brighton finished sixth in the Premier League last season to qualify for European competition for the first time in the club's history.
"Chelsea are getting one of the top midfielders in the world," said Brighton's technical director David Weir.
"Moises has been one of our exceptional players over the past 18 months."
'RARE MIDFIELD SKILL SET'
Chelsea have spent close to £900 million on players in just three transfer windows since a takeover fronted by LA Dodgers co-owner Todd Boehly and private equity group Clearlake Capital.
However, they slumped to 12th in the Premier League last season -- their lowest finish since 1994.
New manager Mauricio Pochettino's reign got off to a promising start in a 1-1 draw with Liverpool on Sunday.
"Moises possesses a rare midfield skill set and is a player we've been targeting for some time," said Chelsea's co-sporting directors Laurence Stewart and Paul Winstanley said
"We believe he will make a significant impact at Stamford Bridge this season – and in the years ahead."
Chelsea could be set to snatch another midfield target away from Liverpool with Southampton's Romeo Lavia also reportedly favouring a move to Stamford Bridge.
Liverpool are in desperate need of midfield reinforcements after captain Jordan Henderson and Fabinho departed for Saudi Arabia.
Naby Keita, James Milner and Alex Oxlade-Chamberlain have also left Anfield since the end of last season after their contracts expired.
Alexis Mac Allister, who also starred for Brighton last season alongside Caicedo, and Dominik Szoboszlai are Liverpool's only two signings of the window so far.