The 22-year-old Ivorian joined Bournemouth on loan for the rest of the season in the January transfer window.
Injuries have restricted Traore to just seven appearances in his time at the Vitality Stadium but Bournemouth have seen enough to exercise a purchase option included in the loan deal.
The Cherries have done well to secure their top flight status for another season following a difficult start to the campaign.
Traore told the club website: “Everyone has been really welcoming with me. Everything is good here and I’m just happy to be here.
“I’ve had a couple of injuries so I’m looking forward to next season, but right now I’m working hard and hope to come back before the end and help the team.”
Chief executive Neill Blake added: “We’ve been really impressed by Hamed since his arrival in January, and we’re delighted to have him with us for the long term.
“He’s shown he’s already capable of performing well at the top level, and we’re excited to see him develop even further.
“The permanent signing of Hamed is another mark of our ambition for the coming years, building on this season’s success to compete once again in the Premier League.”
