The club have agreed an initial fee of £1.5m for the 19-year old with a number of add-on clauses written into the deal which could see it rise to over £5m.
Rico moves to Griffin Park immediately and will receive further treatment on the troublesome shoulder injury that may require surgery and so will not be available for selection at present.
The Birmingham-born defender joined the club as an 11-year old and rose through the Academy system to sign professional forms in July 2014.
He made his senior debut as a 17-year old and featured on 10 occasions during the 14/15 campaign.
The teenager’s impressive performances caught the eye of England under 19s coach Aidy Boothroyd who awarded Henry with his first international call up for The Three Lion’s friendlies with the Netherlands and Japan in November 2015.
The club turned down a seven figure sum for Henry 12-months ago and the player signed an improved contract in October 2015.
He was named as the club’s Young Player of the Season at the end of last term and also featured in the PFA League One team of the year.
Rico Henry made 57 appearances in all competitions for the Saddlers and the club would like to thank him for his efforts during his time here and wish him every success in the future.
“Rico has done tremendously well for us and is capable of playing at a higher level,” said Manager Jon Whitney. “He feels he is ready to test himself in the Championship and the offer made was one which we feel meets his valuation both now and in the future with the numerous add-ons included.
“He leaves with our best wishes and we will now look to the next group of players to continue to push the club forward.
“We’ve built up a proud history of developing young players and will continue with this philosophy.”