The 26-year-old Colombia forward has signed a four and half year deal and could make his Blues debut at Aston Villa this weekend.
Chelsea's Egyptian forward Mohamed Salah will move in the opposite direction on loan and will be with Fiorentina until the end of the season.
Cuadrado played an eye-catching role in Colombia's run to the quarter finals at last summer's World Cup in Brazil, scoring in the 4-1 victory over Japan and contributing four assists, a tally only equalled by Germany's Toni Kroos.
He has since scored six goals in 23 appearances in Italy and the Chelsea website described their new signing as playing "predominantly behind a striker, but he is also comfortable on either flank. Pacy and agile, he is a purposeful attacking threat with an eye for the spectacular."
Cuadrado said: "I am very happy and thankful for this opportunity I’ve been given.
"This is a great club and, honestly, it is like a dream to join the Chelsea family and to know that the manager believes in me. I’m happy.
"The best part about this dream is that I'm going to be part of such a big club and that's huge motivation to perform well. I'm quick and positive and I have to show that to help my team-mates.
"It's really going to be brilliant to work with one of the best coaches anywhere in the world. I'm very proud to be playing for him and think he will make me a better player.
"We are a big club so we can win important things. Playing for this team, the league championship is I think the most important thing. As for everything else, Chelsea have big players so we want to win big things.
"Best wishes to all of the Chelsea fans. I hope to perform for them in the best possible way and I hope we can achieve a lot of things together."
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