Collyer becomes Albion's ninth summer arrival, following new faces including Jimmy-Jay Morgan and Conor Townsend through the door at The Hawthorns.
The 22-year-old already knows the club well, having spent the first half of last season on loan there and making 12 Championship appearances before a mid-season switch to Hull City, where he went on to help secure promotion to the Premier League.
At Manchester United, Collyer made 13 appearances across all competitions during the 2024-25 campaign, with his competitive debut coming in a 3-0 home defeat by Liverpool in September 2024. Explaining his decision to return to West Brom on a permanent basis, Collyer pointed to several factors.
"There were a few reasons why I was so keen to return. The size of the club is one of them. I also really enjoyed my time here on loan in the first half of last season," he said.
"Another reason was the manager, James Morrison. He was really keen to have me back and that's all you want in football - a manager who wants you and wants to see you do well."
Collyer admitted his first loan spell at the club had not gone entirely to plan, but said the experience of also playing for Hull last season had strengthened his resolve to succeed at The Hawthorns.
"I ended up following most of the Albion games in the second part of last season, to be honest. I remember coming back with Hull and getting the runaround," he said.
"Being out on loan makes you grow up. Even though I didn't have the best loan spells last season, I felt like I grew up and became much more of a man. I felt as though now was the right time to move on and really kick on with my career and I'm glad that I'll get the chance to do that here."