Calafiori, who can play as a central defender or left-back, had a successful season with Bologna, playing 30 Serie A matches, scoring two goals, and providing five assists, helping the team secure a Champions League spot by finishing fifth.
Arsenal manager Mikel Arteta praised Calafiori as a "great signing" and highlighted his strong character and impressive development over recent seasons.
Arteta added, "Riccardo has shown great progress with Bologna and Italy, and his skills will strengthen our team as we aim for major trophies. We look forward to working with him and integrating him into our squad."
Previously, Calafiori had stints with Roma and Genoa, and played for Basel before joining Bologna for £3.3 million. At Bologna, he primarily played as a central defender under Thiago Motta, who has since moved to Juventus. Juventus and Chelsea were also interested in signing him.
At Arsenal, Calafiori is expected to compete with Gabriel and Oleksandr Zinchenko for playing time. Arsenal aims to win their first Premier League title in 21 years after two consecutive second-place finishes. In other transfer news, Arsenal plans to sell midfielder Emile Smith Rowe to Fulham for an initial £27 million, with potential add-ons of £7 million.