The 28-year-old becomes the Baggies second signing of the day, following the arrival of Egyptian defender Ali Gabr - also on loan - from Egyptian Premier League side Zamalek.
It is thought from forward elected to remain close to his family in the Midlands, with a offer from Newcastle United also having been considered.
Sturridge seeking England re-call
The move comes after speculation last week that the England international could make the switch to either La Liga or Serie A, with Sevilla and Inter Milan both keen on acquiring the out-of-favour striker's services.
His decision to remain in the Premier League however, means Three Lions boss Gareth Southgate will be able to keep a sharper eye on the player, with the World Cup in Russia less than five months away.
Since 2011, Sturridge has played 26 times for his country having scored eight goals in that period. A tally, the former Chelsea and Manchester City mis-fit we be keen on adding to.
Out of form, out-of-favour
The move brings to an end a lengthy period of speculation over the player's future, having falling out of favour with Reds boss Jurgen Klopp.
After the German converted attacking midfielder-cum-winger Roberto Firmino into an out-and-out forward, Sturridge has seen his chances in the starting XI dwindle as his rather checkered injury history also coincided with spells out of the Liverpool squad.
There has is no refuting the quality on show from Sturridge - as Klopp readily still admits - but having made just nine appearances this season and netting only twice, his previously prolific goal-scoring ratio on Merseyside has steadily risen from a negative point of view.
On the capture of Sturridge, Baggies boss Alan Pardew could not contain his excitement on the signing:
"This is a big coup for us," said Pardew. "He has fantastic talent."
Birmingham-born Sturridge also said: "I've got friends here I've played with before. The manager spoke very well, the challenge with the team and the style of play - I just felt this was the right fit for me."
With West Brom continuing to improve under new stewardship, the goal-scoring mantle has in recent weeks been taken up by Jay Rodriguez, as Salomón Rondón continues to find goals a luxury.
With Sturridge thrown into the mix, the Pardew blueprint to firmly eradicate former boss Tony Pulis' defensive ways are now beginning to take shape.