Jurgen Klopp's side have needed defensive reinforcements ever since duo Virgil van Dijk and Joe Gomez sustained long-term injuries at the start of the campaign, but for much of the January transfer window, it seemed the Reds would be unable to make any additions.
Liverpool will pay Schakle £1million upfront for the loan deal, with a further £500,000 in potential add-ons. The Reds will also have the option of buying the promising 20-year-old for an initial £18million in the summer.
Kabak, who completed a medical in Germany on Monday afternoon, is set to travel to Merseyside later this week to join up with his new teammates.
The Turkish centre-back comes highly rated from the Bundesliga, with Liverpool manager Jurgen Klopp revealing his close friend - and former Schalke manager - David Wagner's glowing reviews of the youngster.
“Yes, Dave was already very, very positive about him,” the boss said. “He came very young to Germany and everybody was clear he was a massive talent.
“He is only 20 now. He plays in his second club [in Germany]; he is at Schalke and unfortunately, they are in a bad position in the moment. For him, I think it's a really good moment to make the move because, like each player in the world, you need a stable team around you and that's what we can deliver.
“We deliver a stable team and you can play your position, you don't have to be 20 with pretty much everything on the pitch and not allowed to make mistakes anymore.
“He's really a big, big talent and we are really looking forward to working with him.”
The Reds boss also spoke of Kabak's "proper personality," which means he is willing to learn but "can delivery already."
“Dave always said he will be a future captain of a team. He is a proper personality,” Klopp added.
“When you go abroad in that young age, to another country and play for other clubs, he could have played in Turkey in each club he wants. Goes then to Stuttgart, goes then to Schalke. He could have gone anywhere but he wanted to make football steps and we are a proper football step for him.
“He wants to learn but he can deliver already.”
Kabak will wear the number 19 shirt for Liverpool and we understand he will pick up a weekly wage of around £65,000.
His signing, along with Davies, seems like a shrewd move from Liverpool and relieves much of the current injury worries, although missing players of Virgil van Dijk's calibre will continue to be a huge loss.
A little over 20 minutes after confirmation of Kabak's arrival, the club announced centre-back Joel Matip would miss the remainder of the season due to an ankle ligament injury.
The news is another blow for both Liverpool and the player himself, but Davies and Kabak should be enough for the Reds to see out the season.
Welcome to Liverpool, Ozan!