The 20-year old has progressed through the youth ranks at St James' Park after joining the Magpies at the age of 10.
Donaldson made his first-team debut for Newcastle in August 2009 and has made six appearances for his hometown club. He spent two months on loan in League One last season at Hartlepool, where he played 12 times.
Tranmere Rovers boss Les Parry: "I'm really pleased to be able to bring Ryan to the club.
"He's a talented young player who I've watched a lot for Newcastle's reserves and last season for Hartlepool and he's always impressed me.
"He's good on the ball and has an eye for goal and he'll be an excellent addition to our squad. I'd like to thank Newcastle manager Alan Pardew for allowing Ryan to join us."