Wilson, who has signed a deal that could see him stay at Craven Cottage until 2026, progressed through the ranks of the Reds after joining at the age of nine.
The 24-year-old made just two appearances for Jurgen Klopp's first team, however, and has spent much of the past four seasons out on loan.
Spells at Crewe Alexandra and Hull City were followed by a successful stint at Derby County in the 2018-2019 season.
He spent a season in the Premier League with Bournemouth in 2019-2020, scoring seven goals as the Cherries were relegated, while last term he was on loan with Championship side Cardiff City.
Wilson has been capped 29 times by Wales and featured for the Dragons in their UEFA Euro 2020 campaign, receiving a red card in the closing stages of its 4-0 Round of 16 defeat to Denmark.
Fulham also announced the signing of goalkeeper Paulo Gazzaniga on Sunday (AEST) after he left Tottenham Hotspur last month, the 29-year-old Argentinean signing a two-year deal.