The 24-year-old was previously linked with a switch to Arsenal, but QPR have revealed that they have snapped up the Chile striker, who played in all four of his nation's World Cup encounters.
Vargas, who will wear the number 24, joins compatriot Mauricio Isla at Loftus Road, and he says that he cannot wait to begin playing in the "super competitive" Premier League.
"I've spoken to Mauricio a lot and he said it's a great, relaxed environment to work in, with a fantastic squad of players," he told the club's official website.
"The Premier League is the best in the world, the most exciting in the world, and I am looking forward to competing in what is a super-competitive division."
His arrival represents Harry Redknapp's sixth signing of the summer, and the 67-year-old is enthused by his latest capture.
"Eduardo is a quality player. He's sharp, he's bright, and he's very lively on and off the ball," Redknapp added.
"I really liked the look of him during the World Cup and he's a player our scouts have been looking at for some time. He's been on our radar for a long time now and we've had reports on him, from our scout over there, for a while.
"We've had him watched a lot, over the last year or so, and the feedback has been very positive. I'm delighted we've been able to bring him in."
The move signals Vargas's third loan spell away from Napoli - whom he joined in 2012 - having also enjoyed stints with Brazilian outfit Gremio in 2013, and La Liga club Valencia last season.