The 29-year-old was signed from Italian side Napoli on a three-year deal.
Although, the financial details of the deal were not disclosed, British media reported Everton had paid a fee of around 25 million pounds to Napoli.
Allan scored 11 goals and grabbed 16 assists in more than 200 appearances for Napoli across all competitions, helping them claim the Coppa Italia last season.
“It is a real pleasure to sign for Everton. I am immensely happy to be here,” Allan said in a club statement.
“I hope I will, like I have done in my entire career, contribute with my performances together with my teammates and that I put in some great games, great performances and win important things.”
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