The Republic of Ireland U19 international, 19, progressed through the Academy ranks at the Stadium of Light and featured in the Black Cats' reserve side last term.
He could have extended his stay on Wearside but was delighted to become reunited with former Sunderland boss Roy Keane at Portman Road.
Hourihane told the club's official website: "I was offered a new contract at Sunderland but there are a lot of players up there and when I found out about Ipswich's interest, I felt it was the right move for me.
"I know the manager from Sunderland and a few of the lads from Ireland. I have played with Ronan Murray in the U19 team and I've known Shane O'Connor for a long while.
"When I see what Shane has achieved after being given a chance here, that's what I've got to aim for."