Blades academy product Lowton has put pen to paper on a four-year contract which will keep him at Villa until the summer of 2016
The deal is believed to be worth around £3 million and Lowton will provide competition for last season's first choice right-back, Alan Hutton, and deputy Eric Lichaj.
Lowton becomes new Villa manager Paul Lambert's second signing in the space of 48 hours after the capture of midfielder Karim El Ahmadi from Feyenoord.
The Scot successfully brought players from the lower leagues through the ranks when in charge at Norwich and Lowton fits his criteria in terms of being a hungry player who is keen to succeed.
Lowton, who had two years remaining of his United contract, made nearly 100 appearances for the Blades since making his first team debut during the 2009-2010 campaign.
Championship sides Ipswich and Derby have been strongly linked with a move for Lowton since the Blades lost the League One play-off final to Huddersfield in May.
But the player is keen to try to impress at Premier League level and will be part of the first team squad being reshaped by Lambert.
Lowton said: "It's every boy's childhood dream to play in the Premier League and it was one of mine.
"This opportunity is fantastic and I thank the manager for giving it to me. Hopefully I can repay the faith that's he's shown in me and keep going at a higher level.
"Just from driving up to the training ground you can see the difference in the quality of things. The training ground looks spectacular and the pitches look phenomenal.
"It's a massive club in the Premier League with a big fan base and I'm looking forward to getting to work as soon as I can."
Lowton admits his attacking instincts are his main asset.
He said: "I played the majority of last season at right back but I have played right midfield and central midfield as well.
"I think my main asset is going forward and my technical ability but obviously I'm going to try and add whatever the manager is after from me.
"These are exciting times for me and I can't wait to go out and start playing."
Lambert said: "Matthew is a really talented young player who brings a lot of things that can really benefit the club.
"He's a good player already and he's only young so he has the potential to be a really good player for us.
"He's hungry to succeed and to go further in the game, both of which are attributes that we want at this football club and that we are looking for.
"We won't put any pressure on him, we just want him to go out and enjoy playing.
"What he's done so far at Sheffield United has been great so hopefully we can progress him a bit and he'll do very well for us."