Manchester-born Pugh, 21, made just seven first team appearances for his local team but with his chances limited at Old Trafford, he had reached the right time to move on.
"I'm just looking forward to getting started here now," he told the club's official website. "I got to a stage at Manchester where I needed a change and I think this is the perfect place for that change.
"Obviously when you are at a club you want to play as many first team games as you can, that's what you are judged on, I would have liked to have played more games but it didn't happen and I believe I can do that here now.
"High standards have always been expected of me at Manchester United since I've been there, and hopefully that's what I can bring here and carry it on.
"I don't know how the fans will take to me, but if I am performing well on the pitch then I am sure they won't have a problem with me. It won't matter then who I played for before, as long as I am doing a job for Leeds United it will all go well."
Pugh signed trainee forms in 1999 and made his senior debut against Maccabi Haifa in the Champions League on 18 September 2002.
"It's definitely a challenge," added Pugh, "but I'm looking forward to that challenge and hope I can succeed here.
"If I can play as many games as possible and establish myself as a regular then I will be happy. I know it's not going to be easy to get into the side but I will work as hard as I can."
