The Ghanaian international has long been a target of Pompey boss Harry Redknapp and has signed a five-year contract at Fratton Park.
Muntari, 23, played a starring role at last summer's World Cup in Germany as Ghana beat the USA and Czech Republic en route to the last 16.
He played over 100 games for Serie A side Udinese, and featured in the 2005/06 Champions League.
"I first saw him at the World Cup against Brazil and he was the best player on the pitch. I've watched him three times since and he has been very impressive," said Redknapp.
"We tried to get him in the last two transfer windows but Udinese didn't want to sell so we are delighted he's finally coming to Fratton Park
"He's got a great left-foot and has great energy with the ability to run all day and, he's a good passer of the ball too. Ghana have one of the best midfields in the world and he's a regular fixture in their side. He's a player with a big future."
Muntari said: "Portsmouth is a fantastic club with class players such as Pedro Mendes, Sol Campbell, David James and Kanu and a great manager in Harry Redknapp, who is also a great man.
"I have been a Pompey supporter ever since they first wanted me a year ago and I've watched as many games as I could. The fans are great and they really love their football. I'm really looking forward to playing in front of them and helping the club make a push for European competition."