Labyad, who began his career at PSV, joined Sporting in July 2012, but has struggled to break into the first team at Estadio Jose Alvalade.
The midfielder has yet to feature for Primeira Liga leaders Sporting this season after making 27 appearances for the Portuguese outfit last term.
However, the Dutchman will have a chance of winning a title on home soil as he moves to a Vitesse team that is level with defending champions Ajax at the top of the Eredivisie.
And the 20-year-old, capped at international level with Morocco, was quick to express his delight at returning to his homeland.
"I am very happy and relieved that I can go back to the Netherlands," Labyad told Vitesse's official website.
"Vitesse have always made a very positive impression on me. The conversations I have had with (technical director) Mohammed Allach and (coach) Peter Bosz were quite pleasant.
"I am therefore greatly looking forward to becoming part of a successful team."
Labyad could make his first Vitesse competitive appearance when Peter Bosz's side travel to Zwolle on January 18.
Get the best features, fun and footballing frolics straight to your inbox every week.
Thank you for signing up to Four Four Two. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.