The Blades had been looking for a permanent deal for the player but turned down a reported offer of £600k from Leeds earlier in the week.
Barnsley-born Horsfield will go straight into the Leeds squad for the opening Championship game of the season against Norwich City at Elland Road.
Kevin Blackwell said: "We are going to take him on loan until Christmas to see how Geoff performs. If things go well we have got the option to complete something with Sheff United.
"He is raring to go and it will be nice to see him in a white shirt. All being well he should be making his debut on Saturday.
"Hopefully Geoff can produce the goods that we know he can.
"There's no doubt, when I let Rob (Hulse) go and with Cressy (Richard Cresswell) not being fit, I needed a bit more power up top.
"Geoff's proven, so much so that West Brom have tried to keep taking him back, so he must be doing something right."