The attacking midfielder returns to the Serie A club after three years of his departure.
The Brazilian signed for West Ham in 2018 for a club record fee of £35m, scoring 12 goals in 73 appearances.
Having completed his loan deal with Porto last term and with a first team opportunity seeming difficult for Anderson at West Ham in the foreseeable future, the midfielder will look to lay his claim for a starting berth elsewhere.
Reports were that West Ham could have received an amount in the region of £4m from the Italian side but have rather added a sell-on clause into the deal.
The 28-year-old spent last season on loan at Porto where he featured only 10 times.
West Ham on their official website after confirming the deal thanked Felipe for his enormous output in his days at the club.
"Everyone at West Ham United would like to thank Felipe Anderson for his contribution made during his time as a Hammer and wish him the very best for his future."
Anderson had a medical in Rome on Tuesday, having being on the bench for West Ham's 2-2 friendly draw with Dundee last Friday.
In a five-year stint with Lazio, Anderson bulged the net 34 times in 177 appearances during his first spell at Lazio from 2013-2018.
Lazio will begin their 2021/22 Serie A campaign with a trip to Empoli on 22 August at the Carlo Castellani Stadium.
The Biancocelesti will be led by former Napoli and Chelsea gaffer Maurizio Sarri who replaced Simone Inzaghi after the latter joined Serie A champions Inter Milan.
