One of the most highly rated young players to come out of Chelsea’s academy in recent years, Derry, 19, broke into the first team last season.
The winger went on to make three appearances over the course of the season, with his debut coming in the 4-0 FA Cup win over Hull.
With regular opportunities set to be hard to come by at Stamford Bridge due to the lack of European football, Derry has now completed his loan to Sporting.
Sporting were looking to replace Geovany Quenda, who is now a Chelsea player, joining the club after spending last season back on loan with the Portuguese giants.
Speaking to the club’s official website, Derry is clearly excited about the opportunity, saying: "It's an incredible feeling.
“I'm really looking forward to getting on the pitch and playing in front of all the fans. I can't wait to get started.
"When I think of Sporting CP, I think of players who excite the fans and young players. Coming here was a very easy decision.
"It means everything. I know how much this Club represents to Sporting fans and I am prepared to always give my best.
“I know that Sporting CP creates different players who are capable of expressing themselves on the field. I feel that this will be the perfect place for me.”