Barkley had made three appearances for Frank Lampard's side in the early stages of the new campaign – scoring in last week's Carabao Cup win over Barnsley – but will now spend 2020-2021 with Villa.
Villa boss Dean Smith described the signing as "a real coup" as his in-form team look to build on their narrow Premier League survival last season.
Barkley, 26, joined Chelsea from Everton in January 2018 and has been part of squads who have won the FA Cup and Europa League.
However, he has started just 28 Premier League matches in his two-and-a-half-year stay at Stamford Bridge amid struggles to recapture his peak form and fitness displayed while at Everton.
Barkley has 33 caps for England, last appearing at international level in a match against Bulgaria in October 2019.
He joins a Villa team who have won all four of their matches so far this season, two each in the Premier League and EFL Cup.
"Capturing a player of Ross's quality is a real coup for our club and I am certain he will thrive here and improve our team," said Smith as the move was confirmed on Wednesday.