The 17-year-old left-back became Everton’s youngest ever senior player earlier in 2021 and has been called up at Under-19 level for England.
It has been reported that Small has also played as a central defender and left winger during his time at the Toffees.
This marks the third time Saints have completed the transfer of a young defender in this transfer window so far.
Since July, Southampton have brought in Chelsea duo Tino Livramento and Dynel Simeu on permanent deals. The former has already impressed at Saints, starting two Premier League matches so far.
According to Southampton manager Ralph Hasenhuttl, plenty of other clubs were after Small’s signature.
“I am very pleased we have been able to bring in another talented young player, especially when there were again a number of clubs who were interested,” Hasenhuttl said.
“I think our philosophy of how we develop these young players and give them their opportunities has been an important factor in this, and we are looking forward to working with Thierry and helping him make the most of his potential.”
The Austrian is happy with another young summer signing and Small seems similarly pleased.
“It’s an unbelievable feeling. A big moment for me and my family, especially to join such a family-orientated club. It’s an honour to be here and I can’t wait to get started. When I came to visit I thought this is the best place for me to develop as a player and reach new levels to my game.”