The 24 year old Dutchman joins the German side on a 2 and a half year deal until the summer of 2013.
Hoffenheim striker Demba Ba moved to West Ham on loan earlier this week, so Babel may be employed as a striker at the German club. The side are currently 8th in the 18 team Bundesliga.
Newly installed manager Ernst Tanner replaced Ralf Rangnick a few weeks back and said:
“We are very proud to be able to sign in Ryan Babel an internationally-experienced player from a top club like Liverpool.
“We are convinced that he is a big gain for us with his character traits and his sporting qualities.”
Ryan himself said:
“I am looking forward to my new mission in Hoffenheim.
“My first impressions are absolutely positive. I hope now to be able to quickly get into the team.”
Liverpool paid £11.5M for Ryan in the summer of 2007 from Ajax, but the player failed to make the grade in the Premier League, with inconsistent performances.