Norwich boss Nigel Worthington said: "I am delighted to be getting such a quality right-back in Mattieu Louis-Jean.
"He is a very quick player who has played at the very highest level with Nottingham Forest. He will add value to the squad.
"The move also gives Gary (Holt) an opportunity to carry on his career. I would like to thank Gary very much for his contribution to Norwich City and wish him the very best for the future."
Holt becomes Forest boss Gary Megson's second summer arrival, joining Nicky Southall.