Villas-Boas is confident Holtby can make an instant impact for his team as they look to secure Champions League football for next season.
"We rate the player very highly," he said. "We managed to get him at a good price. It was always a question of how much Schalke would want for the player.
"I think there was willingness from the player to come early, so we have decided to add him to the squad.
"He is an extremely talented attacking midfielder who can play in a variety of roles. He is used to playing in different positions. He is young and talented. I think he is an excellent addition for us."