Champions League and Bundesliga holders Bayern announced the news on their official Twitter account on Sunday evening.
Thiago, 22, is set for a medical with Pep Guardiola's side ahead of penning a four-year contract at the Allianz Arena, having been targeted by Manchester United this summer.
Bayern outlined on their official website that they met a release clause of €25 million to reunite Thiago with former Barca coach Guardiola, who gave the midfielder his debut at Camp Nou in 2009.
A statement read: "FC Barcelona and FC Bayern Munich have reached an agreement over the transfer of the player Thiago Alcantara to the German club for a total of €25 million.
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