The 23-year-old centre-back, who played for Bosnia at the World Cup, agreed a five-year contract with the Premier League club.
"Muharemovic becomes our second signing of the summer, and everyone at Leeds would like to welcome him to the club, as we continue our preparations for the 2026/27 Premier League season," Leeds said in a statement.
Muharemovic, who impressed with Sassuolo in Serie A last season, is a replacement for Pascal Struijk, who joined Brighton for £20 million in June.
He follows Harry Wilson to Elland Road after the Wales forward's free transfer from Fulham earlier in the close-season.