Leicester appeared favourites to capture the sought-after striker, who has signed a four-year deal, while West Ham also had a bid accepted by Peterborough for the 27-year-old.
But the Seagulls have underlined their intentions for the forthcoming npower Championship campaign by beating the duo to Mackail-Smith's signature.
On the move: Brighton have signed Mackail-Smith
Mackail-Smith started out at Dagenham & Redbridge and moved to Peterborough for an undisclosed fee in January 2007.
He scored 99 goals for Posh during his four-and-a-half-year stay, including one in the 3-0 play-off final win over Huddersfield at Old Trafford in May.
Poyet believes the capture of Mackail-Smith 'shows we want to go places'.
He told the club's official website: 'Some thought it was a done deal that he would be heading elsewhere, butwe got the player which is good, as it shows that we want to go places,to do better.
Seaside adventure: Mackail-Smith rejected a move to West Ham and snubbed Leicester in favour of Brighton
'A signing like that can only help us as we try to bring more players in.
'He's a player that we can build our team around, which is why I was so keen to bring him here, and one of the most pleasing aspects for me is that we have signed him despite interest from some other big, big teams.
'When I first sat down with the chairman, Craig was at the top of my list, our number one target, so I'm absolutely delighted to have signed him.'
Sven spends big in quest to join the elite, with England pair first on the list for LeicesterNorwich set to beat Everton, Wigan and QPR to ?3m hotshot Mackail-Smith
Explore more:People: Craig Mackail-Smith