The 23-year-old believes that the chance to work with Holloway again was too good to turn down, declaring that he is excited to challenge for regular first-team football in the Premier League.
He told the club's official website: "I went back home to Scotland over the weekend ahead of meeting up with the international squad so I've had to travel back down but it's a great bit of news for me.
"I was at Blackpool with the gaffer here when they got promotion that year and that was probably the highlight of my career so far. It is a big move for me to leave Villa and I would like to thank the fans there but it's a new chapter in my life now and I can't wait to get started.
"I want to get myself in the door and start training and hopefully get myself in the team. I haven't played this season and didn't much last year so I can't wait to get going."
Bannan has played 64 times for Villa in the top flight, alongside 10 caps for Scotland.