Dunn will join Tranmere Rovers next season permanently after spending the 2016-17 campaign on loan with the Vanarama National League side.
Dunn said: "15 years @liverpoolfc I've had the best experience and Many ups and downs but would like to thank all the staff that have helped me into the person I am today I've loved this club since the day I was born and will always...
"Liverpool FC is a Family that I am proud to have been apart of".
Dunn missed out on Tranmere playoff heartache as he was forced to sit out the defeat to Forest Green at Wembley through injury, but the Scouser can't wait to return to Prenton Park next season.
"I'm delighted to get it all sorted," he said. I was a little uncertain about my future but I came here on loan and didn't really have a good crack of the whip due to injury.
"But now that I'm signed, I'm really looking forward to pre-season and showing all the fans what I'm about."