The 23-year-old, who primarily plays on the right hand side of midfield, arrives from Serie A side Inter Milan, who he joined last summer from Bundesliga side Hertha Berlin.
Lazaro - who made his international debut against Iceland in 2014 and now has 28 caps and three goals for his country - started his career with Red Bull Salzburg.
He will wear squad number 23 for the Magpies and is the club's second acquisition of the January transfer window, following Algeria international Nabil Bentaleb, who joined Newcastle from Schalke 04 for the rest of the campaign on Tuesday afternoon.
"I'm very happy to be here and can't wait to meet all my team mates, get out on the training pitch and hopefully get a lot of victories in the future," Lazaro said.
"I've only heard great things about the club. I've had good talks with the coach so I feel very happy to be here now. Those conversations convinced me that this is the right place for me to come."
Head coach Steve Bruce added: "Valentino is a quality player who'll add to us in attacking areas of the field, where we need to improve. He can play in a few positions but he is a natural winger with an excellent delivery.
"We have worked hard to get him ahead of other clubs, so I'm delighted with what we've done. Along with Nabil Bentaleb, he'll give us strong options."