The 25-year-old came through the youth system with the Vixens and was named the club's Players' Player of the Season for 2017-18.
Matthews is also able to play in midfield and gives Neil Redfearn more options as he strengthens his squad ahead of the new season.
"I have spent my whole career at Bristol City Women so this was a big decision for me to make but once I heard about the interest from Liverpool Ladies it was a no-brainer," she said.
"It is a fantastic club with real ambitions to challenge for trophies so I am really excited for the future.
"I would also like to place on record my thanks to everyone at Bristol City, from the youth set-up to the first team, for helping me to develop into the player that I am today."
Ladies manager Redfearn said: "I am delighted to have signed Jasmine as she is a real leader who I believe will play a key part for us next season.
"Jasmine's versatility was another bonus for us as she is equally comfortable playing in midfield as she is in defence.
"Jasmine had many other offers to join other clubs so I am really pleased that she has chosen to sign for Liverpool Ladies."