The 27-year-old is Leeds’ second signing of the January transfer window, following the addition of Liam Bridcutt on loan from Sunderland.
He has been handed the No 18 shirt and will be available for Saturday’s FA Cup third round tie against Rotherham United.
He said: “This is a great opportunity for me to come here and hopefully play some regular football at a very big club.
“I know the gaffer and Paul Raynor from my time at Crawley and I am looking forward to working with both of them again here.
“It was a move which happened very quickly and one which I am delighted to have been able to finalise so soon.
“I’m looking forward to meeting up with the lads, I’ve got my first training session this morning and I’m available to play in the cup should I be picked.
“I’d love to make my debut at Elland Road in front of the Leeds United supporters. I’ve played there before and I know what it’s all about. It’s a special place to play football.”
Carayol spent the first half of this season on loan with Huddersfield Town, appearing 15 times for the Terriers, scoring three times.
He previously spent two months with Brighton and Hove Albion on loan.
Carayol was born in Banjul, Gambia, but has spent the entirety of his career in England.
He represented the likes of MK Dons, Crawley Town, Torquay United, Lincoln City and Bristol Rovers before signing for Middlesbrough in 2012.
He has made 50 appearances for 'Boro.