The Macedonian international initially joined Napoli on a one-year loan deal from Inter Milan, but the 28-year-old striker has now signed a three-year contract in a deal reportedly worth £6.4million.
"I am in seventh heaven," Pandev told www.calciomercato.com. "I wanted to stay at Napoli at all costs after a year in which I have felt right at home.
"I have great confidence in this project and I am convinced that the victory in the Coppa Italia final is just the beginning of a great time for this club. I hope I can end my career at Napoli."
Pandev scored six goals in 30 league appearances for Napoli last season.
Napoli later officially confirmed Pandev's signing on their website.
"Goran Pandev will be tied to the azzurri club until June 2015 with an optional further year," read a statement.
"Pandev is our first important reinforcement in attack this summer," added Napoli president Aurelio De Laurentiis. "We are very happy and so is the player.
"Pandev is a wonderful person and a great player.
"He is a gentleman and has proved to be generous because he agreed to earn less than what he got at Inter.
"I hope he not only plays the next four years at Napoli but also has an even longer career with us."