British media reported the transfer fee at 12 million pounds ($15.63 million).
"He's a young and talented player and hopefully he can develop even more here," Newcastle manager Rafa Benitez said in a statement.
"We hope he can show us the passion, commitment and ability that he showed in the Championship last season."
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Murphy, a boyhood Newcastle fan, represented England at the Under-21 European Championships last month where he helped his side reach the semi-finals.
Murphy is Benitez's third signing in the close season transfer window after adding winger Christian Atsu from Chelsea and defender Florian Lejeune from Eibar.
(Reporting by Hardik Vyas in Bengaluru; Editing by Ken Ferris)
