The 27-year-old, signed by former manager Martin O'Neill in a £5million deal in January, leaves the Stadium of Light without scoring a goal for Sunderland in 11 starts and having been told by Paolo Di Canio that he is not in his plans.
"I'm delighted to be here," Graham told the club`s official website. "It's great to come to a club where everybody is on a high after winning promotion and I've only heard good things about this club.
"I know I'm coming to a good club with a top manager, a fantastic stadium and some very good players.
"When the chance came to sign here on loan, I jumped at it.
"It's all done now and I can look forward. Training camps are a chance for players to bond and I don't want to miss out on that."
After making a name for himself with 41 goals in 87 starts for Watford the forward moved to Swansea in June 2011 and continued to find the back of the net on a regular basis before joining the Black Cats.