The 19-year-old arrives at St. Andrew's on a three-year deal after Blues agreed compensation with the Hoops.
The Scotland U19 international is a highly-rated prospect who has attracted a host of potential suitors since turning down a fresh contract offer from Celtic to test himself in English football.
Johnstone has been on trial at Wast Hills in recent weeks and has turned out for Blues U21s. Recently-appointed senior professional development coach
, Alan Thompson, is well known to Johnstone from his time on the first-team staff at Celtic Park.
Commenting on Johnstone's arrival, Lee Clark said: "I'd like to thank the board and everybody involved for making this happen. Negotiations with Celtic have been long but we got there in the end.
"The board have backed me because I feel the boy can offer future value to the squad. Denny was highly-thought of by Celtic and they wanted to keep him but the boy wanted to move on. Two unnamed Scottish Premier League clubs also wanted to bring him in as their number one striker, while opponents he faced playing for Celtic in The NextGen Series also expressed an interest off the back of his performances.
"Having Alan (Thompson) on board has helped to smooth the move as he's a familiar face around the club. I just think Denny will give us something different to the other strikers we have at the club. He's very competitive and can hold the ball up well but he's also got terrific movement in and around the box.
"We have high hopes for Denny and I'm delighted that we could make it happen."
An interview with the new recruit, who will wear first-team squad number 16. will follow here on bcfc.com.