The 24-year-old moves to the City Ground from Bundesliga side Union Berlin on a five-year deal for a club-record fee reported to be around £17million.
Awoniyi, who scored 20 goals in 43 games in all competitions in his last season in Germany, becomes Forest’s first senior signing since gaining promotion back to the Premier League.
Forest head coach Steve Cooper said: “There’s been a lot of interest in Taiwo from other Premier League clubs and other clubs across Europe, so we’re delighted that he’s chosen Nottingham Forest.
“Our recruitment and coaching teams have been monitoring his progress closely over the last few months.
“He’s a player who we really believe in and we look forward to him going on to fulfil his potential and become a top Premier League striker with Nottingham Forest.”
Awoniyi began his professional career at Liverpool and had a six-year spell at Anfield until last July but did not make a first-team appearance and spent most of it abroad on loan.
Liverpool are set to receive 10 per cent of the fee under the terms of his departure.
Awoniyi’s 15 goals in 31 Bundesliga matches helped Union Berlin secure a fifth-place finish and qualify for the Europa League for the first time since 2001-02 – then the UEFA Cup – but the lure of the Premier League proved too strong.
“I’m very excited to be here at Nottingham Forest,” he told the club’s website.
“It’s always been my dream to play in the Premier League and, having spoken to Steve Cooper about our ambitions and looking at Forest with its great history, it’s a club that I want to be part of.”
It’s always been my dream to play in the Premier League
Having represented Nigeria at Under-17s, Under-20s and Under-23s level, Awoniyi won the first of his three caps for the Nigeria national team against the Central African Republic last October and scored his first goal against Sudan in January at the Africa Cup of Nations.
The striker could make his competitive debut for Forest on the opening day of the season on August 6, when Cooper takes his side to St James’ Park to play Newcastle.
Forest are also expected to have Manchester United goalkeeper Dean Henderson on board by then.
The loan move is due to be completed once the 25-year-old returns from a break.