Having agreed to a five-year contract with the Gunners after completing his medical on Tuesday, the Ivorian winger becomes the club’s most expensive signing.
Arsenal will pay £20 million upfront with the remaining £52 million being spilt over the next four years.
The 24-year-old winger had also been a prime target for top European clubs with Manchester United and Napoli all said to have approached the left-footed forward.
But with Arsenal acquiring his services, has ended all advances made by other potential suitors.
Reports are that the player’s representatives were convinced with Arsenal’s approach, as they were willing to pay all clauses surrounding Pepe’s contract to emerge as the favourites in the bidding war.
After confirming the deal by the club, Arsenal manager Unai Emery told the club’s official website he is delighted to have a highly-rated personality joining his squad.
"Nicolas is a highly-rated and talented winger who was wanted by many of the top teams in Europe.
"Signing a top-class winger has been one of our key objectives in this transfer window and I'm delighted he's joining.
"He will add pace, power and creativity, with the aim of bringing more goals to our team."
Pepe was an integral figure when Lille finished second in the French Ligue 1 last season as he made forty-one appearances across all competitions for Les Dogues, recording 22 goals with eleven assists in the French top tier.
