28-year-old Diaz leaves Liverpool after three and a half years in the club.
"I am very happy", says the Colombian in a statement on Bayern's website.
Liverpool has already strengthened the attack side with 23-year-old Frenchman Hugo Ekitike from Eintracht Frankfurt and 22-year-old German Florian Wirtz from Bayer Leverkusen this transfer window, but according to British media reports, the club is preparing a bid for Newcastle's Swedish attacking star Alexander Isak.
An attempt to recruit the Swede will partly depend on other players being sold, which has now happened with Diaz. But also that Newcastle recruits one or two replacements for Isak.
Both Newcastle and Liverpool are in Asia on their respective pre-season tours. Isak is however not in Newcastle's squad. According to Newcastle, it is due to an injury, but British media reports that the Swede wants to leave the club and that it is the reason for his absence.
