Financial details were not disclosed by the clubs, but British media reported the deal was worth up to £24 million.
George made 11 appearances for Everton last season, after joining the club on loan on deadline day of the January transfer window.
"I’m so happy to sign for Everton. I loved my time here on loan last season, so as soon as I knew it was a possibility to return, that's always what I wanted," George said in a statement.
A product of Chelsea's youth academy, George broke into the senior team in 2024 and made 37 appearances for the London club.
George's arrival follows Everton's signing of midfielder Hayden Hackney from Middlesbrough, and the permanent acquisition of Merlin Rohl after the German joined on loan from Freiburg last season.