The 23-year-old joins the club on a one-year loan deal with an option to buy.
The Uruguayan's loan is the fifth deal that the Manchester United have completed this summer following the permanent transfers of Lenny Yoro, Joshua Zirkzee and ex-Bayern Munich duo Matthijs de Ligt and Noussair Mazraoui.
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Ugarte joined PSG from Portuguese side Sporting CP in 2023 for around £50 million and made 37 appearances for the French club as they won a domestic double.
He has also earned 22 caps for the Uruguayan national team and was part of Marcelo Bielsa's squad that finished third in the 2024 Copa America.