Sporting academy product Fernandes spent last season on loan at Portuguese top-flight side Estoril, where he made 28 appearances and helped the club reach their first cup final in 80 years - a League Cup final shootout defeat by Braga.
British media reported Southampton had agreed to pay around 15 million pounds ($19.54 million) for the 20-year-old.
"I'm very happy to be here, it's a dream come true to come to England and play in the Premier League," Fernandes said.
"It's the best league in the world, in my opinion. It has the best coaches, the best players, the best teams. It's good for me, for my growth and I'm happy."
The Portugal under-21 international is the latest addition to manager Russell Martin's squad after the club also recently signed Chile striker Ben Brereton Diaz from Villarreal and Japanese midfielder Kuryu Matsuki from FC Tokyo.
"Mateus is a player we have been monitoring for a while and someone we are really excited about," Martin said. "He brings great energy, retains possession well and always looks for the forward pass.
"He is young and full of enthusiasm. With the ability he has to drive forward, we think he has some key attributes to really help us – not just in the future, given his age, but here and now in the Premier League."
Saints kicked off their league campaign with a 1-0 loss at Newcastle United and next host Nottingham Forest on Saturday.
