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The 22-year-old defender played 102 Ligue 1 games for Lorient during a three-year spell and had been linked with potential moves to Barcelona and Liverpool in the off-season.
But Dortmund confirmed they have won the race for his signature on Thursday. The transfer fee is reportedly €12million, with Guerreiro’s former club retaining a sell-on clause.
The completion of the deal left Dortmund’s sporting director Michael Zorc delighted as the club added to the signings of Marc Bartra, Ousmane Dembele, Mikel Merino, Emre Mor and Sebstian Rode.
“Raphael Guerreiro is a technically skilled player who feels at home in several positions,” he said.
“We are very happy that he chose Borussia Dortmund.”
Left-back Guerreiro is at Euro 2016 with Portugal and played the full 90 minutes of Tuesday’s 1-1 draw with Iceland in Group F.