Manager Lee Clark told the club's website: "Scott has been on our minds all season. He's a player that we have watched more than any other.
"When Terry McDermott and I went up to Falkirk to watch him a couple of weeks ago we saw a very good young player."
Arfield made his Scottish Premier League debut in 2007 and has gone on to represent both Scotland Under-21s and Scotland B.
The contacts we have up in Scotland rate Scott as one of the brightest young prospects in Scottish football
Huddersfield Town manager Lee Clark
He was a target for Hamilton Accies and Hibernian last summer, but Falkirk rejected bids from both clubs.
Southampton had expressed an interest in January and were again linked with Arfield before his switch to Huddersfield was confirmed.
Hibs and Hearts had also been linked with the midfielder, but it always seemed likely that he would choose a move to English football after the Bairns' relegation to Scotland's Division One.
Arfield was not deterred by Huddersfield missing out on promotion to the Championship after their play-off defeat by Millwall and a transfer that appears to be a club record for Falkirk has now been completed.
"The contacts we have up in Scotland, other managers, players and so on, rate Scott as one of the brightest young prospects in Scottish football, so we are delighted to have him on board," added Clark.
"He's a box-to-box midfield player. He's very energetic and he can play in all four positions across midfield. He's a very good passer of the ball and that suits what we're about.
"All the reports we have on him are very, very good. There have been a lot of other clubs looking at Scott, so we're absolutely delighted to have him on board."
Source: BBC Sport
Source: BBC Sport