The 23-year-old has agreed a five-year deal with Everton after the Toffees coughed up £35m.
Everton were expected to sign Wilfried Zaha from Crystal Palace.
However, the south London club stood firm and refused to sell the winger for less than £80m.
As a result, Everton turned their attention elsewhere and signed Iwobi from Arsenal.
Everton boss Marco Silva has hailed Iwobi, revealing he was a top target all summer.
“Alex was one of our main targets for this window and I believe he is a fantastic signing for Everton,” he said.
“He is a direct and skilful winger and attacking midfielder who always works very hard for his team.
“He is still young but already with a lot of top-level experience – 100 Premier League matches, more in Europe and many international games.
“It was important for me to have one more quality option for our attacking positions to add to what we have with Richarlison, Bernard and Theo Walcott.
“Alex fits exactly the profile of player I want in my model.
“He is hungry to join Everton and take the next step in his career, to help us compete with the strongest teams in the league and reach his potential at our club.”
Arsenal boss Unai Emery has also spoken out after selling Iwobi, claiming the Nigeria international set an example to fellow youngsters at the Emirates.
“Alex has made a big contribution at Arsenal,” Emery said.
“He worked hard in the academy, where he was an example to many young players and has been an important part of our squad.
“We wish Alex every success in the future.”