McPhail told the club's official website: "As a club Forest have a great history but they have got some great young players and I'm looking forward to being part of what is going on here."
The Republic of Ireland international can play wide on the left or in central midfield. He could even work as the man behind the front two if Hart chooses to play the diamond formation.
He follows Danny Mills out of Elland Road who joined Middlesbrough on a season-long loan and could make his debut tonight against Forest's rivals Leicester City.
Meanwhile, Forest's fixture against West Ham United at Upton Park scheduled for Saturday 6 September has been postponed because of international call-ups.
The new date is yet to be confirmed.