Mali midfielder Mohamed Sissoko has passed his medical at Liverpool and completed a £5m transfer from Valencia.
Benitez signed Sissoko for Valencia in 2003
The 20-year-old Mali international was a target of Everton boss David Moyes, who tried to sign him and team-mate Emiliano Moretti in a double deal.
But the deal foundered when the Spanish side insisted on a buy-back clause in Sissoko's contract.
That allowed Reds boss Rafael Benitez, who took Sissoko to Valencia in 2003, to sign his former player.
Benitez said: "Mohamed is a young central midfielder who plays a high-energy game with a high tempo.
"He's young, he's not bad on the ball and he will improve the balance of our team in the middle.
"He's had two good years with Valencia where he has won trophies. I know him well and he's a very good player."