Traore has been on Villa's radar all summer and is well known by John Terry from his time at Chelsea. He becomes the club's fourth major signing of the window.
Villa have already broken their transfer record to sign Ollie Watkins from Brentford on a five-year deal, while Matty Cash has also joined from Nottingham Forest and goalkeeper Emiliano Martinez has arrived from Arsenal.
"We're delighted that Bertrand has chosen to come to Villa," said Dean Smith.
"He's a player with immense talent who will really enhance our attacking options."
The 25-year-old Burkina Faso international has a strong pedigree with top-level playing experience at Ajax and Chelsea before his move to Lyon three seasons ago, where he has played over 100 games competing for the Ligue 1 title and in the Champions League.