With Alan Stubbs, the head coach, determined to add to new recruits Farid El Alagui and David Gray, the Easter Road club are also understood to be closing in on a one-year loan deal for Hull City back-up goalkeeper Mark Oxley.
Allan was linked with interest from Rangers earlier this summer and had been on trial with Sky Bet Championship side Derby County. However, the former Scotland under-21 internationalist, who was reportedly being chased by Celtic, Rangers and Newcastle United before he left Scotland for West Bromwich in January 2012, completed a medical at Hibs yesterday after agreeing to join Stubbs at Easter Road.
The 22-year-old was regarded as one of the brightest talents of his generation when he enraged United by refusing to sign a new contract in 2011 amidst suggestions his representatives were seeking £1600 per week to stay. A switch to West Bromwich soon followed but he failed to play for the first team and was farmed out for two loan spells with Portsmouth, as well as stints with MK Dons and Birmingham City.
Stubbs said: "We're delighted that we've been able to add Scott to our squad - he is a top quality player with immense potential. He's an outstanding young player with a bright future, so the fact he has agreed to come here to Hibernian is a tremendous coup for everybody at the club.
"Scott will add something different to what we already have within our squad - he is an attacking midfielder, who can both create and score goals. He's young, but has already gained a lot of experience from his time at Dundee United and also down south, so he will be equipped for the demands of the upcoming season."
Allan said: "The move here to Hibs ticks all the boxes. I want to achieve success here with Hibs. I'm really excited about what we can achieve."