South Korean midfielder Kim joined the Baggies from Seongnam Ilhwa Chunma earlier in the year and made seven appearances last season.
He has now accepted a two-year contract at the Hawthorns, with a fee of £550,000 agreed, and Baggies boss Tony Mowbray expects Kim to make a greater impact in the Premier League next term.
"I'm now looking forward to working with Kim next season," Mowbray told the club's official website.
"His loan spell was all about settling into a new club and culture, but he's got undoubted talent and he'll have a more significant part to play next season."