The former Arsenal academy player, 23, rated as a prodigious talent when he was coming through the ranks with the Gunners, has been handed the chance to kick-start his career after featuring just four times for Blues this season.
Crowley goes straight into head coach Grant McCann's squad for the League One home game with Accrington Stanley on Tuesday.
The schemer is Hull's third signing of the January transfer window following the arrivals of Cardiff City winger Gavin Whyte - on loan for the rest of the season - and former Dundalk midfielder Jordan Flores.
Coventry-born Crowley spent a brief spell earlier in his career on loan at Barnsley under Lee Johnson in 2015, playing 11 times for the Reds.
He has also had loan spells with Oxford United and in Dutch football with Go-Ahead Eagles and Cambuur.
Head coach Grant McCann said: “It’s a great signing for us.
"He will make a difference in the front three and is versatile in how he can play, off the left or as a 10, sometimes as a nine.
"He’s a clever player and wants to get on the ball, wants to get on the half-turn, wants to create opportunities and wants to score goals.
"It’s three new signings in the last week with Gavin Whyte and Jordan Flores, and we’re really pleased with our business.
“He was in the top five for expected assists in the Championship last year and the other four are in the Premier League, he’s a serious player.”