Foster's arrival follows the sale of Scott Carson to Turkish club Bursaspor, with Birmingham taking Myhill to provide competition for Colin Doyle following the departures from St Andrew's of Foster and Maik Taylor.
Foster, who earlier this year ruled himself out of England duty, will not return to Birmingham during the season as the deal prevents both clubs from recalling their keepers during the loan.
West Brom head coach Roy Hodgson told the club website: "We are very, very happy that the deal to bring Ben from Birmingham has gone through.
"He was always the goalkeeper that we targeted as our number one choice for the season.
"We are hoping he will be as successful here as he has been with his previous clubs.
"We are confident Ben is the goalkeeper we need to help us enjoy a successful season in the Premier League."
Foster joined Birmingham from Manchester United last summer and played all of the club's 38 Premier League games in a season which saw them suffer relegation but also win the Carling Cup final.
Albion sporting and technical director Dan Ashworth added: "We are absolutely delighted to have signed a goalkeeper of the calibre of Ben, who has just enjoyed an excellent season at Birmingham.
"He was our top goalkeeping target during this summer transfer window and it's great we have managed to bring him here.
"I have contacted several managers and coaches who have previously worked with Ben and they all spoke very highly of him, both as a professional and as a person."