Hodgson, a former Inter Milan and Blackburn boss, was Liverpool’s first choice despite a host of other names being mentioned.

It is believed it has cost Liverpool £2m to release the Englishman from his contract at Craven Cottage.

Former player and manager Kenny Dalglish, who was part of the selection process with managing director Christian Purslow and is currently an ambassador for the club’s academy, had expressed an interest in returning to a role in which he enjoyed great success in the late 1980s and early 1990s, but was overlooked for the post.

Hodgson’s name had been linked with England after their disappointing World Cup campaign under Fabio Capello, but negotiations were already at an advanced stage with the Merseysiders and the deal has now been completed.

Hodgson will be unveiled at a press conference this afternoon after overseeing the first day of pre-season training at the club's Melwood training ground.

“This is the biggest job in club football and I’m honoured to be taking on the role of manager of Britain’s most successful football club,” said the Englishman.

“I look forward to meeting the players and the supporters and getting down to work at Melwood.”

Hodgson’s first task at his new club will be to persuade the likes of captain Steven Gerrard and star striker Fernando Torres that they can have a successful future under his tenure.

The pair, along with midfielder Javier Mascherano, are the three big names who have all been linked with moves away this summer, although the uncertainty over who would be manager and the ongoing sale by co-owners Tom Hicks and George Gillett have led to speculation there could be a mass exodus.

Hodgson has less than a month to get to know his players and prepare them for a Europa League third qualifying round first-leg tie on July 29.

He is at least familiar with the prospect, having guided Fulham from that starting point all the way to the final this season, eventually losing to Atletico Madrid.

The former Switzerland manager then has to begin the task of strengthening a squad which is severely lacking strength in depth.

Providing he hangs on to his major players his priority is to find a left-back, as Emiliano Insua is the only specialist in the first-team squad, and much-needed support for Torres – a failing of Benitez’s which contributed significantly to their poor campaign when the Spain striker was injured.

However, he will more than likely have to do that on a restricted budget as the current financial climate at Anfield, with the club £350m in debt and Hicks and Gillett holding out for the best price, means there are not the funds available for a massive rebuilding exercise.

That was one of the major factors, along with his increasingly fractious relationship with authority figures inside Anfield, which led to the departure of Benitez.