Tarkowski recently made headlines when he asked to be left out of last month's league encounter between the two teams, though it was later revealed his mother's illness had prompted his decision to withdraw.
The 23-year-old said he was keen to return to Lancashire to be closer to his family and his wish has finally been granted.
Burnley boss Sean Dyche told the club website: “James is a player I have known for a couple of seasons and I’ve monitored his progress from Oldham, right the way through to now.
“He is at a good age and has gained a lot of experience over the last couple of seasons and I feel he can be a big part of us going forwards in the future.
“We want competition in all areas and we have been a little bit light in that area all season, so we feel he’s a very good player and an excellent signing for the club, both now and for the future.”
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