The 21-year-old Northern Ireland youth international heads to Bloomfield Road on a three-year contract, with an optional extra year.
The move ends the defender's long affiliation with United, having risen through the club's ranks after initially catching at the Reds' Belfast School of Excellence.
Cathcart signed professional forms in July 2005 and earned the 2006/07 Jimmy Murphy Young Player of the Year award, having also gained a first team squad number.
Although he enjoyed pre-season outings at senior level, Craig never made a competitive debut for United, instead learning his trade in loan spells with Royal Antwerp, Plymouth Argyle and Watford.
Everybody at Manchester United would like to wish Craig all the best with his new club.