The Indianapolis/Arsenal Technical High School product announced his decision at a news conference carried live on ESPNU.
Lyles had been considering only Kentucky and Louisville since September after having previously dropped Florida and Butler from his list. He took an official visit to Louisville the weekend of Aug. 31 and was on hand for Kentucky's "Big Blue Madness" on Oct. 18.
"This was a hard decision with two great programs and two great coaches," said Lyles, the No. 2-ranked power forward by ESPN.
His commitment caps what has been a busy week for Kentucky coach John Calipari. The Wildcats received a commitment from ESPN 100 shooting guard Devin Booker (Moss Point, Miss./Moss Point) on Thursday but also lost out on James Blackmon Jr. (Marion, Ind./Marion), who committed to Indiana.
Ironically, Lyles spent almost two years committed to Indiana, making his initial pledge in September of his freshman year and remaining committed until the summer prior to his junior season. Kentucky was almost immediately perceived to be the favorite following his decommitment and never seemed to waver from that position after hosting him for several unofficial visits within the last year.
Lyles' commitment returns Kentucky to the top of the national class rankings, a position Calipari knows well. The Wildcats were the top-ranked class in four of the last five years.
Lyles and Booker join big man Karl Towns (Metuchen, N.J./St. Joseph's) and point guard Tyler Ulis (Matteson, Ill./Marian Catholic) to give the Wildcats four prospects ranked in the top third of the ESPN 100.
"We all know each other as we all have played against each other and get along," Lyles said. "Now I will be going against the best every day in practice and playing with them in games."
Lyles is a highly skilled big man who prefers to play facing the basket. He's at his best from 17 feet and in, where he can knock down open jumpers, attack off the dribble or operate from the low to mid-post. Together, he and Towns might not be quite as dominant a defensive duo as Kentucky has become accustomed to on the interior, but they'll bring an unprecedented level of skill to stretch out opposing defenses and open lanes for dribble penetration.
Calipari and his staff might not be done getting commitments. They are likely to add one more forward to their 2014 class in Stanley Johnson (Fullerton, Calif./Mater Dei), the No. 9 overall prospect who was on hand for Big Blue Madness and is the top remaining target. The 6-6 small forward is also strongly considering Arizona, among others. Jonah Bolden (New South Wales, Australia/Findlay College Prep), No. 70 in the ESPN 100, is another prospect who could come into play if Kentucky feels as if it's losing ground with Johnson.
Paul Biancardi contributed to this report.