The 23-year-old was officially presented to Gremio's fans in Porto Alegre Saturday after signing a one-year loan deal from Italian Serie A club Napoli, reports Xinhua.
"I know what it takes to be successful and I've come here to win trophies," he said.
Vargas joined Napoli last January but has scored just three goals from 12 appearances for the club, mostly as a substitute.
"I have lacked confidence in Europe," he said. "I've mostly only been used as a substitute in the last few minutes of matches. Here it is going to be different."
Gremio paid Napoli 1.2 million euros for the loan and has also agreed to cover the player's monthly salary of about $165,000.
The club says it is hoping to register Vargas with South American football's governing body Conmebol in time for Wednesday's Copa Libertadores qualifying match against Ecuador's Liga Deportiva Universitaria in Quito.