The 21-year-old, younger brother to Blues star Eden, spent the previous two campaigns on loan at Zulte Waregem.
He joined the Premier League side from Lens in 2012, the same summer as his brother's transfer, but has yet to feature for the first team of his parent club.
Hazard the younger played European football for Zulte Waregem in 2013-14 and won his first international cap for Belgium, being named in Marc Wilmots's 30-man squad for World Cup 2014 before being one of seven players cut before the tournament.
He will now get his first taste of the Bundesliga for Lucien Favre's side, who finished sixth in Germany's top flight last term.
He joins Tomas Kalas, Wallace and Cristian Cuevas in being loaned out by Chelsea this summer.