Freeman, 22 spent the latter stages of last season on loan at Bramall Lane - making his debut in the 1-0 victory over Carlisle United in mid-March and went onto make 10 (+2) appearances for the League One club.
However he has been informed by Rams boss Steve McClaren that he is deemed surplus to requirements at Pride Park and is free to leave.
Negotiations between the Blades and the player are believed to have begun following Derby's 1-0 defeat in the Championship Play-Off Final to Queens Park Rangers at Wembley.