Blanco refused to return to Ukraine because of the unrest in the country and he becomes boss Alan Irvine's 11th signing of the summer.
The 26-year-old, who has two international caps, has signed a two-year deal at The Hawthorns with an option for a third year.
Irvine said: “I’m really pleased that we’ve managed to add Sebastian to the squad.
“He’s an Argentina international who joined Metalist for a lot of money. Unfortunately, he suffered an injury not long after the move, which held up his progress.
“Since then, he’s shown his quality. He’s adept with both feet, is a nice crosser of the ball, creates chances and also scores goals.
“With the players we’ve brought in this summer, the squad has a much better balance thanks to the hard work of the chairman, Richard Garlick, Terry Burton and the recruitment staff.”
Technical director Burton added: “Sebastian plays in the wide areas but can also operate as a No.10.
“He’s a technically-gifted player who has scored goals from distance with both feet. To have a player who is comfortable on either side is a big asset. We hope Sebastian will be able to help the team unlock defences when games are tight.”