The move dashed the hopes of Owen's former club Liverpool of securing the 25-year-old's return. The Magpies completed their club record swoop - believed to be in the region of £17million - for the Real Madrid star, handing manager Graeme Souness a massive boost.
Owen was to undergo a medical on Tyneside before sealing his switch to St James' Park in a move which represents a coup for Newcastle on a par with their capture of skipper Alan Shearer back in July 1996.
"Bringing Michael to St James' Park will rank alongside the signing of Alan Shearer as my proudest moment at Newcastle United," the chairman Freddy Shepherd announced on the club's official website, www.nufc.co.uk.
"Newcastle fans love centre-forwards and Michael is a fantastic goalscorer. He's someone we would love to build the team around and we hope he can help us bring success to the club."
Owen's decision comes less than 24 hours after he travelled to the north-east to meet Souness, chairman Freddy Shepherd and former international team-mate Shearer to discuss his future following talks with the Anfield club.
It represents a major change of heart from the player, who has always insisted a return to Merseyside was his preferred option despite indicating he would be prepared to join the Magpies on loan for a season.
But Real's need to raise cash to help fund their bid for Sevilla defender Sergio Ramos and Newcastle's insistence on a permanent deal meant that was not an option.
Reports today suggested Owen was returning to Liverpool for further talks amid speculation his former club had finally made a formal approach, although with the Reds unwilling to spend significantly more than the £8million for which they sold him to the Spanish aristocrats last summer, Newcastle had gained the upper hand.
There have even been hints the striker could bide his time at the Bernabeu Stadium until the January window with the latest transfer deadline looming tomorrow night.
Owen's future has been the subject of intense speculation for months, and that grew on Sunday when he did not even make the bench for his side's opening La Liga fixture in Cadiz.
Newcastle's latest coup is reminiscent of their £15million capture of Shearer back in July 1996, and a similar return on their investment this time around would be welcome with Souness' side having collected just one point from their first four Barclays Premiership games this season without scoring a single goal.
For Owen too, the move will give him regular first-team football as the World Cup finals approach, and that will be of immense comfort to England boss Sven-Goran Eriksson.
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