Chelsea will pay £106.8million for Fernandez following a breakthrough in talks with Benfica after a day of tense negotiations.
The signing was not confirmed until 10.01am on Wednesday, after the two clubs completed the necessary paperwork before the deadline.
Fernandez has agreed an eight-and-a-half year contract at Stamford Bridge and was flying into the capital via a private jet this morning.
The signing of Fernandez has taken Chelsea's spending under new owners Todd Boehly and Clearlake since last summer beyond £500m. The transfer, which pushed Premier League spending close to the £800m mark in January, eclipses the British record set when Jack Grealish joined Manchester City from Aston Villa for £100m in 2021.
During 11th-hour negotiations on deadline day, Fernandez underwent a medical in Lisbon. Chelsea had a private jet waiting to bring him to London, while lawyers worked through the night to complete the transaction.
The Blues paid slightly more than his £105m buyout clause. But, crucially, the deal allows them to play the fee in instalments, with an initial fee of around £34m.
Chelsea were not willing to pay the fee in one sum, as they bid to stay in line with Financial Fair Play regulations. They reopened talks for Fernandez after cooling their interest in Moises Caicedo and Amadou Onana.
Fernandez was one of the breakout stars of the World Cup and was named young player of the tournament in Qatar.
Manchester United and Liverpool had also identified him as a transfer target but neither have the financial means to sign him in January. Chelsea were keen to wrap up a deal before being rivalled by other clubs next summer.
Benfica manager Roger Schmidt last night criticised Fernandez for his conduct as he pushed for a move to Chelsea. He said: “Benfica is much bigger than a player. We just need players who are happy to play for Benfica, who are passionate.
“We had a player who wanted to leave and a club willing to pay the clause, we couldn't do anything.”