The 26-year-old former Barnsley midfielder has made the move to the Galpharm Stadium once his contract with the Wirral club expires at the end of June.
Kay, who scored 12 goals as he was named as Tranmere's player of the year in the recent League One campaign, has highlighted the influence of manager Lee Clark as a key reason behind the switch.
"Lee Clark phoned me up and everything was positive," he told Huddersfield's official website. "We met up and it has all followed on from there. He didn't really need to sell the club to me but when I met up with Lee and (chairman-elect) Dean (Hoyle) you could see the desire they both have.
"They have a really firm idea of where they want to go. They want to take the club places and as a player that is what you want to hear. I want to be part of a team that achieves those goals."
Clark was equally pleased to confirm the deal and added: "He is a strong, physical player and we have identified that we need that presence in the side."