The Baggies have seen off competition from several Championship rivals for the 21-year-old, who has made six substitute appearances in the Premier League for the Red Devils.
Collyer will go straight into Ryan Mason’s squad for the Saturday lunchtime trip to Wrexham.
The Albion boss had been looking to bolster his midfield options and Collyer will compete with Alex Mowatt, Jayson Molumby and Ousmane Diakite for game time.
Collyer said: “I spoke with the gaffer and I got a really good first impression from him.
“Albion seems like the right place and the right environment for me and I’m hoping to play as much as possible.
“This is a great opportunity for me to help the team and take my game to the next level, which I’m really excited about.”
Baggies sporting director, Andrew Nestor, added: "Toby is a dynamic midfielder who we rate highly and believe that his strengths will complement our already strong midfield options.
"He is an ideal central midfielder for our playing model with his physical attributes, progressive play and passing ability, and has the capability to make a real impression this season."