The 24-year-old becomes the Hatters’ third new arrival of the summer and reunites with manager Jack Wilshere, who worked with him during their time at West Ham United’s academy.
Ashby began his career with the Hammers, making seven senior appearances before joining Newcastle in 2023.
The defender arrives with valuable EFL experience, having enjoyed loan spells at Swansea City, QPR and Bradford City.
“It was rather quick in the making. I’m quite used to going out on loan at the end of the window, so it’s nice getting something in early,” Ashby told Luton website.
“I’ll be with the lads now for a full pre-season, which will help towards me getting to know everyone and helping the club.
“My first chat with Jack really (sold the move to me). Being with him at West Ham, it was a bit of a little reunion for us, and after five minutes I said to my agent, ‘Yes, I want to be here’. It wasn’t really that hard a decision.”