The 25-year-old left Blackburn for Spain before the start of last season but went on to spend the second half of the campaign on loan at Sheffield United, where he scored six goals in 14 top-flight appearances but was unable to prevent the Yorkshire club being relegated from the Premier League.
Brereton Diaz, however, will remain in English football's top division by joining newly-promoted Southampton.
The south coast club did not disclose a transfer fee but British media reports said the Saints had spent an initial £7 million.
"I'm absolutely buzzing," Chile international Brereton Diaz, born in Stoke, central England, said in a Southampton statement.
"It's been smooth these past couple of days, and I'm happy to get everything sorted and signed.
"I'm really excited to meet everyone, it's great to be involved with this great club."
Southampton manager Russell Martin added: "I'm really delighted to welcome Ben to the group. He's a versatile and intelligent footballer, capable of playing in a number of positions across the forward line.
"He is a strong, powerful runner and a confident finisher with a good goalscoring record, including last season's spell in the Premier League in which he adapted to the level extremely quickly."
Brereton Diaz became Southampton's second signing Tuesday after the club said Kuryu Matsuki had joined from FC Tokyo.
The 21-year-old midfielder will spend the season on loan at fellow Sport Republic club Goztepe in Turkey.
