USA Under-23 international Horton joined Cardiff from League One side Peterborough in 2014, but failed to make an appearance for the club.
The 20-year-old was born in London but moved to Ohio in the United States at the age of 9.
"He has very good potential and will be a future number one," Leeds manager Uwe Rosler told the official club website.
"He has fantastic physical attributes and is a really positive character. He really wants to learn."
Horton, brought across to England on the recommendation of ex-Spurs goalkeeper Brad Friedel, Rosler added: “We had Charlie on our radar through our goalkeeping coach Richard Hartis.
“I know the manager and assistant manager of the USA team and they gave him a glowing reference. We’re very happy with him.”
Horton himself said: “I’m really excited. Any time you can come to a club like Leeds, where all the players are hungry for success and hungry to move up the table and back to where the club belongs in the Premier League, that’s every player’s dream.”