The 21-year-old, who can operate anywhere across the midfield,has agreed terms on a two-year contract, tying him to the club until the summer of 2019.
He becomes Darren Way’s third new recruit of the summer following the signings of Rhys Browne and Connor Smith.
Gray began his youth career with Wycombe Wanderers and moved to Crystal Palace aged 15.
The Aylesbury-born youngster made two appearances for the Eagles in the 2014/15 campaign before spending time on loan at Cheltenham Town and Hartlepool United.
He caught Luton’s eye after a string of fine performances for the Monkey Hangers, where he scored six times in all competitions.
Gray joined the Hatters last summer, scoring his first goal against Sky Bet Championship outfit Aston Villa in the first round of the EFL Cup.
He played 28 times in his debut year at Kenilworth Road, netting on a further three occasions and now begins a new chapter of his career in Somerset.
“Jake fits the criteria for players we want to bring to Yeovil,” manager Way told YTFC.net.
“He played in some very big games last season and was a consistent performer.
“We’re delighted to secure his services considering the interest he had from other clubs.”
Are you interested in sponsoring Jake for the 2017/18 campaign? Please contact Commercial Manager Dave Linney on 01935 847872 or email firstname.lastname@example.org for more information.