Brereton Diaz spent the second half of last season on loan at Sheffield United, scoring six goals in 14 Premier League appearances.
Southampton had been looking for a new forward after Che Adams opted to join Torino this month having rejected new contract offers from Saints.
Brereton Diaz started his career at Nottingham Forest before spending five years at Blackburn Rovers, scoring 47 goals in 177 appearances.
He switched international allegiance to Chile after coming through England’s youth set-up and made his debut in 2021.
The 25-year-old played in Chile’s three games at the Copa America last month as La Roja finished third in Group A, behind Argentina and Canada.
He joins summer signings Adam Lallana, Taylor Harwood-Bellis, Charlie Taylor, Ronnie Edwards, Nathan Wood, Yukinari Sugawara and Flynn Downes as Saints prepare for their Premier League return after winning last season’s Championship play-offs.
