Baggio, who has been training with the Rovers squad for the past week, completes the trio of signings manager Graham Souness had been hoping to tie-up at the beginning of last week - Markus Babbel and Barry Ferguson having already signed on at Ewood Park.
"We have agreed a deal with Lazio for a season's loan," Blackburn chief executive John Williams told the clubs official website on Sunday.
"He has impressed in training, had a medical and we have sorted out personal and contractual terms."