The 23-year-old, who captained Crewe in League One last season, has signed a three-year deal at Elland Road.
Murphy, who becomes Leeds boss Brian McDermott's second signing following the arrival of Matt Smith from Oldham, had previously held talks with Wolves, while Blackburn were also reported to have had a seven-figure bid accepted by Crewe on Friday.
"Myself, the owners, the staff, the players, and I'm sure and I can speak for the supporters on this one, are absolutely delighted to sign Luke," McDermott told the club's official website.
"He's a player I've known for a long time, I've watched his career progress, and I feel he was the best player in his division last year.
"I'd like to thank the owners for making this deal happen. We had spoken about Luke earlier in the summer being one of the key signings we're looking to make."
Murphy, 6ft 2in and a product of Crewe's Academy, made his debut for the Alex as a 19-year-old against Swindon in 2008 and went on to make close to 200 appearances for the club, scoring 21 goals.
He still had over a year to run on his deal at Gresty Road after signing a two-year contract last September but, after being named in the League One team of the year at the end of last season, said he was ready to play at a higher level.
The deal is a major boost to Leeds fans after boss McDermott admitted last week he was not sure whether owners GFH Capital had made a transfer fund available.
Newly-appointed club chairman Salah Nooruddin said: "There was plenty of interest in him from other clubs, but Brian had never made any secret about his desire to bring Luke here and we're pleased we were able to get things done and welcome a very good addition to our squad."
- Sports & Recreation
- League One