He will sign a deal until 2031 with the option to extend it by another year.
The Blues are poised to break the Premier League transfer record for the second time in a year to sign the 21-year-old.
They paid around £106 million to sign Enzo Fernandez from Benfica in January. The pair will form the base of Chelsea’s midfield going forward.
Chelsea have needed a defensive midfielder to screen the front of their defence since Nemanja Matic’s departure in 2017.
Former managers Frank Lampard and Thomas Tuchel have asked for defensive midfielders, but the club failed to fill the gap.
New boss Mauricio Pochettino arrived and has made it clear that he wants one or two Premier League-ready defensive midfielders in his side.
The Blues earmarked Caicedo as their top target for the position going into the summer, and it seems they have landed their man.
They have beaten Liverpool to the signature of the exciting young midfielder after the Reds made a last-ditch attempt to hijack the deal.
He chose to move to Stamford Bridge as he gave his word to the club that he would join them.
Both sides faced each other today, and it was evident why they needed Caicedo.
Liverpool started a midfield pivot of Alexis Mac Allister and Dominik Szoboszlai, while Chelsea paired Fernandez and Conor Gallagher.
With Caicedo now in the bag for Chelsea, Liverpool will have to turn elsewhere for reinforcements, but they may face competition from Chelsea again.
Liverpool have been negotiating for Southampton midfielder Romeo Lavia for a while, but Chelsea entered the fray with a £55 million bid.
The player has not chosen his next destination, and Liverpool face a fight to snap him up ahead of the London club.
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