The 28-year-old midfielder has made four appearances for the Blades since arriving from the Stadium of Light at the end of October.
The Republic of Ireland international has had a big impact on Gary Speed's side after stepping off the bench at Coventry, scoring the winner in the win at Millwall earlier this month and helping the Blades collect seven points from their last three matches.
Reid's loan was due to expire after Saturday's game at Bristol City but he will now be available for the derby clash with local rivals Doncaster on January 3.
Source: PA
Source: PA