Zouma, 19, joined St Etienne's academy at the age of 14, turning professional in 2011 and is seen as a long-term investment by Chelsea with skipper John Terry, 33, nearing the end his long career at the club.
Chelsea confirmed on their website he had signed a five-and-a-half year contract.
Zouma has made 52 league appearances St Etienne including 12 this season but in November he was banned for 10 matches for a tackle that left the Sochaux player Thomas Guerbert with a broken leg and dislocated ankle.
A rock-solid player, Zouma was part of the France squad that won the U-20 world title last summer and was called up by coach Didier Deschamps ahead of last October's friendly against Australia but did not play.
Media reports put the fee at around 12.5 million pounds ($20.62 million) and he becomes the third major signing Chelsea have made during the January window.
Nemanja Matic arrived from Benfica and Mohamed Salah from Basel while Kevin de Bruyne and Juan Mata left the club.
(Editing by Mike Collett)
