Latics will pay Rovers around £700,000 initially, with the fee rising up to £1.25m based on appearances.
It's a major coup for the Premiership new boys, with Everton having seen two offers for Taylor rejected this summer.
The Liverpool-born defender was at the JJB Stadium yesterday to agree a four-year contract and he also passed a medical.
It was hoped the transfer would have been rubber-stamped last night but negotiations with Rovers over the exact terms of the fee dragged on.
Taylor started out at Prenton Park as a trainee and progressed through the ranks to become a first team regular.
He was a virtual ever-present last season as Rovers reached the League One play-off semi-finals, scoring 10 goals from the right-back or wing-back positions.
Tranmere supporters voted him their young player of the year and he also made the PFA team of the year.
He has been tipped for a move to a higher level since Everton expressed their interest in him last month.
Taylor follows Mike Pollitt and Pascal Chimbonda into the JJB arrivals lounge, with Paul Jewell's patient wait for signings now starting to pay off.
And the recruitment won't stop here, with negotiations ongoing for Portuguese centre-half Ze Castro while a midfielder, right-winger and striker remain on the shopping list.
Jewell now has three right-backs available to him, with Taylor, Chimbonda and David Wright all at home there.
And with Castro being sought to fill a centre-back slot, it's clear the manager thinks his defence needs rebuilding ready for the challenge and pace of the Premiership.
Meanwhile, Ellington now seems set to do a "Gerrard" and agree to stay.
Mixed messages have emerged from the striker's camp over the summer.
He rejected Latics' initial contract offer, but his agent Tony Finnigan held fresh talks with the club yesterday in an effort to resolve his future.
Ellington is in the final 12-months of his current deal and was prepared to see out that time – a position Jewell said he was content with.
But Finningan said: "We turned down the first offer but hopefully it can be resolved.
"He has never claimed anything other than wanting to play for the club and he's got a big decision to make.
"Nathan has got a year left, he knows what he's worth and he's asking for certain things in the contract.
"Everybody knows who the chairman is, they've got a lot of money, but it's never been a question of money, it's a combination of things.
"This guy wants to score goals and there are bonuses for those sorts of things, I don't see there being a problem, I really don't."