The Republic of Ireland international made an instant impact at Bramall Lane after joining temporarily from Sunderland at the end of October.
"I was delighted to extend the loan because the manager [Gary Speed] wanted me to stay and I wanted to continue playing," Reid told the club`s official website.
"I have enjoyed things here, the lads have been great and we have picked up a bit so it makes sense for me to stay.
"Sunderland don`t need to worry about me, I can get some more matches and hopefully I can help get Sheffield United some more points to climb the table.
"I have been involved in quite a few derbies over the years and I really enjoy them, especially when I`m on the winning side."
Source: PA
