The 24-year old striker has departed Norwich City to join the Terriers full-time following his successful loan spell at John Smith's Stadium last season.
Vaughan, who scored 14 goals in the Championship last season, has penned a three-year deal for an undisclosed fee which has delighted manager Mark Robins.
"James' arrival is a significant signing for the club and one that I know our supporters will be very pleased with after his excellent debut season in a Huddersfield Town shirt," Robins told the club's official website.
"Equally, I'm delighted that we have secured his services. The exciting thing is I believe there is even more to come from James.
"He is only 24 and although he already has excellent qualities in terms of strength, pace, work rate and much more, I believe he will have learned from the games he played last season and we will benefit from his knowledge and understanding of the style of football we want to play here."