Hammers boss David Moyes confirmed the academy graduate’s imminent departure following Monday night’s FA Cup fourth-round victory over Derby.
Ashby had been keen to join Newcastle last summer, with the Magpies looking for back-up to England right-back Kieran Trippier.
The 21-year-old was then into the final year of his West Ham deal but the club held firm in the hope that he could be convinced to sign a new contract this season.
That has not been the case, however, and with less than six months left on his contract, the two clubs have now come to an agreement.
Ashby would have been a free agent at the end of his contract in the summer but West Ham would have still been entitled to a compensation settlement from Newcastle, with the exact amount to be decided by a tribunal.
The fee could rise further with add-ons, while West Ham also have a sell-on clause inserted as part of the deal, which would see them entitled to a percentage of any future transfer fee.
