Fosu-Mensah featured in the pre-season for the Red Devils, but has now moved to the Premier League newcomers for the 2018-19 season.
The 20-year-old spent last season on loan at Crystal Palace, where he made 21 appearances in all competitions.
And the Netherlands international is now set to remain in London, with the Cottagers adding another name to their large list of summer reinforcements.
Speaking about his switch to Fulham, Fosu-Mensah told the club's website: “I have a good feeling about the Club. It has a nice history, it’s a nice Club.
“Fulham has a lot of good players, and it’s good for my development to be here. I spoke to the Manager and he gave me a good feeling.
“I’m happy to be here and I want to keep progressing.”
Director of football Tony Khan added: “I’m pleased to announce that Fulham Football Club has signed Timothy Fosu-Mensah on loan from Manchester United.
“Timothy is a gifted young defender who excels at multiple positions, and his addition will further reinforce a strong and promising squad that we have assembled to compete in the Premier League.”
Ahead of their return to the Premier League, Fulham have signed Jean-Michael Seri, Maxime Le Marchand, Alfie Mawson, Fabri, Joe Bryan and Aleksandar Mitrovic on permanent transfers.
Slavisa Jokanovic's side have also captured Andre Schurrle, Calum Chambers, Luciano Vietto and Sergio Rico on loan deals.
Fosu-Mensah made his Man Utd debut during the 2015-16 campaign, and has two years remaining on his contract with the Old Trafford side.