The Denmark international has signed a four-year contract with Wolfsburg.
Wolfsburg’s statement reads: “VfL Wolfsburg have secured the services of defender Simon Kjaer after reaching an agreement with his former club Palermo for the transfer.
“The 21-year-old Dane signed a four-year contract until 30 June 2014.”
Wolfsburg chairman Dieter Hoeness said: “Simon is not only a good, aggressive defensive player, but despite his young age already, he has a personality on the pitch. He already has qualities of a leader.”
Kjaer said: “The change for me is a chance to play at a top club. I think this is right for me.
“We have a strong team that can play in the Bundesliga and I would like to secure a regular place.”