McLaughlin caught the eye of Reds scouts with a string of good performances in the League of Ireland and the 22-year-old impressed even further last month during a trial at the City Ground.
"Stephen is an exciting, young talent who has been attracting attention from a number of other English clubs," said Forest chairman Fawaz Al Hasawi.
"We are delighted he is joining us and look forward to helping him develop his career and fulfilling his great potential."
McLaughlin has signed a three-and-a-half year contract with the npower Championship club.
- Sports & Recreation
- League of Ireland