The 17-year-old had also been linked with Chelsea, Bayern Munich and United but agreed to join Dortmund, as ESPN reported in June. The Bundesliga side's reputation for developing young talent, such as Ousmane Dembele, Jadon Sancho and Erling Haaland, played a major role in the decision.
Dortmund announced the deal with a video posted on Twitter of several players singing the song "Hey Jude" by The Beatles, having earlier released a teaser clip of forward Julian Brandt playing the same tune on guitar.
"Jude Bellingham confidently chose BVB and, of course, was primarily concerned with the sporting perspective that we showed him," Dortmund sporting director Michael Zorc said. "He has enormous potential that we share want to develop with him in the coming years.
"He already has a surprising amount of quality in his own possession as well as against the ball, and on top of that, the player also has a strong mentality. We immediately see Jude as a reinforcement for our professional squad, but of course we will also give him the time to get used to the higher level."
Bellingham added: "I can't thank Birmingham City enough for what the club did for me -- not just this season, but since I came to the club when I was seven. Now I'm really excited to join one of the biggest clubs in Europe. BVB's path, but especially how they help young players to improve, made the decision very easy for me personally and for my whole family. I can't wait to play in one of the most beautiful stadiums in the world."
As ESPN reported in March, Bellingham had been on Dortmund's radar since the 2018-19 season and they convinced him to join the club earlier this year.
United boss Ole Gunnar Solskjaer was also hopeful of landing the youngster, especially after a visit to the Carrington training ground prior to the coronavirus pandemic. At around the same time, Bellingham also visited Chelsea's Cobham training ground but ultimately Dortmund won the race for the England youth international.
The versatile midfielder and his representatives have reportedly been impressed with Sancho's development at the Westfalenstadion and he will also play alongside Haaland and United States teenager Gio Reyna.
Forward Youssoufa Moukoko, 15, will also be eligible to play for the senior team when he turns 16 on Nov. 20.
The striker's debut is highly anticipated after he scored 34 goals in 20 league appearances for the under-19 team in the 2019-20 season. He also notched four goals in seven UEFA Youth League matches.
Dortmund have already signed Thomas Meunier from Paris Saint-Germain on a free transfer, but wing-back Achraf Hakimi has left to join Inter Milan on a permanent transfer after two successful years on loan from Real Madrid.