The 21-year-old joins the Saints for a fee believed to be worth an initial £12m, rising to £15m.
"Bologna announce to have reached agreement with Southampton for the definitive transfer of Gaston Ramirez," read a statement on the Serie A side's official website.
Nigel Adkins has expressed his delight at snapping up the Uruguayan international.
"There is a lot of ambition at the football club and we are all delighted that Gaston is going to come and join us," said Adkins. "Great credit to everyone because we have a young, exciting talent joining us who is one of the best around.
"The chairman has gone and backed this deal big-time with the financial outlay, and what we have got is one of the most exciting prospects in world football coming to St Mary's.
"There is a lot of ambition at the football club and we are all delighted that Gaston is going to come and join us."
Ramirez has earned nine caps for his country.