Everton director of football Kevin Thelwell said of the ex-Sheffield United prospect: "Iliman is a player we have admired for a long time and we are delighted to bring a much sought-after player of his quality to Everton.
Ndiaye, 24, has been one of Everton's standout performers this season, especially in recent weeks under new manager David Moyes.
Ndiaye hailed new boss Moyes' important following last month's 3-2 win against Tottenham, saying: "The new manager has come in and it's clearer what we want to do.
Everton star Iliman Ndiaye was left visibly distraught and in tears after being forced off with an injury just 25 minutes into the Merseyside derby.
Ndiaye has scored six Premier League goals this season, three of which have come in his last five games under Moyes.
