Propper, 25, scored 16 goals in 67 league games for PSV, winning the Eredivisie title in 2016, and has made five international appearances for the Netherlands.
He has signed a four-year contract and is reported to have cost Brighton a fee of around £6 million ($7.8 million, 6.6 million euros).
“Davy is a player with great experience of the Eredivisie with Vitesse Arnhem and PSV Eindhoven,” said Brighton manager Chris Hughton on the club website.
“There is no doubting his pedigree. Davy has played a number of matches in the Champions League for PSV, as well as international football for the Netherlands.
“He’s a strong competitor as a central midfielder and will complement our existing midfield players and he is also a really good age at 25. We are absolutely delighted to welcome him to the club.”
The fee for Propper tops the payment of around £5 million that Brighton are thought to have paid Valencia to sign Australian goalkeeper Mathew Ryan in June.
Propper said: “It’s the biggest competition in the world, so this will be a great challenge and I think I’m ready for it.
“I know Danny Holla, who played here a few years ago, and he told me a lot about the club. He was very complimentary and that was a big help.”
Back in the top flight after an absence of 34 years, Brighton open their Premier League campaign at home to Manchester City on Saturday.
Would you like to place a soccer bet? Click here to get started in 3 easy steps.