Clarets manager Brian Laws told the club's official website: "They wanted him to stay but he wants to come back and fight for his spot."
McDonald's one appearance for Burnley this season was in the Carling Cup.
He will go straight into the squad for the Boxing Day clash at Barnsley in the Championship.
"Kev is coming back and he wants to get his head down and try and get into the team. The more bodies we have got, particularly in midfield, the better," added Laws.