The 37-year-old has signed a one-year contract at the AMEX Stadium with the option to extend for a further year.
Milner spent eight years with Liverpool and won among other trophies, the UEFA Champions League, FA Cup, League Cup and Premier League.
Milner's experience is sure to be useful to a Brighton side who will be playing European football for the first time in their history next season.
With 619 games played, the former Manchester City and Newcastle United winger sits third on the Premier League's all-time appearance list behind Ryan Giggs and Gareth Barry.
Brighton head coach Roberto De Zerbi said: “I’m very glad to welcome James to Brighton. He’s an excellent addition for us and I’m sure he will help to bring us to an even higher level.”
Technical director David Weir added, “We are delighted that James has agreed to join us after a hugely successful period at Liverpool. His experience speaks for itself with the amount of games he has played and the trophies he has won throughout a decorated career.
“These games include European competition, which will be of huge value to us as we embark on our first season in Europe.
“We’re looking forward to working with James when the players return for pre-season.”
Milner has also played for Leeds United and Aston Villa in the past.
Milner won 61 caps for the England national team.
