The Germany international, who has fallen out of favor at White Hart Lane under new boss Tim Sherwood, completed a medical just before midnight on Thursday, with talks continuing into the early hours of Friday morning.
Holtby's agent exclusively told Goal that, despite being linked with the likes of Schalke and Borussia Dortmund, the 23-year-old was convinced by the Fulham project and that he was looking forward to working alongside manager Rene Meulensteen.
"Fulham made a big effort to get Lewis. This club is well led and Meulensteen is an excellent coach and manager. His system and his philosophy fit well with Lewis," Marcus Noack told Goal.
"He will be able to gain matches in his favorite position during the second part of the season. Then we will see how things develop until the summer. Going back to the Bundesliga was not possible due to circumstances that we could not influence."
Holtby will spend the rest of the season on loan with the west London club as he looks to increase his chances of being picked for Germany's World Cup squad, with the Cottagers having the option to purchase the midfielder in the summer.
The former Schalke star, who will wear the No.10 jersey at Craven Cottage, trained with his new teammates at Fulham's Motspur Park training base on Friday.
Dimitar Berbatov, meanwhile, is on his way out of Fulham, with the former Tottenham striker having traveled to Monaco to undergo a medical and discuss personal terms with the Ligue 1 outfit.