Vaughan, 27, has failed to score in six appearances since initially arriving at St Andrew's on 26 November.
But he has led the line well in the absence of injured top scorer Clayton Donaldson, creating chances for others.
His registration was submitted before the 12:00 GMT Friday deadline, clearing him for FA Cup duty this weekend.
He is expected to be part of Gary Rowett's side to face Premier League side Bournemouth, who handed Blues their record 8-0 club home defeat, when they last visited St Andrew's in October 2014 - the game before Rowett took charge.
Vaughan still holds the title of the Premier League's youngest scorer - 16 years & 271 days, for Everton against Crystal Palace (10 April 2005).
Birmingham-born Vaughan grew up in the north side of the city, in Kingstanding and was a boyhood Blues fan. He joined Everton's Academy after his family relocated to the north-west, signing professional forms at Goodison Park in 2004.
After 60 appearances for Everton, mostly as substitute, as well as loans at Derby County, Leicester City and Crystal Palace, he finally left Goodison for Norwich City for £2.5 million in July 2011.
He joined Huddersfield, initially on loan, in August 2012, since when he has scored 33 times in 95 appearances over three and a half years.
Birmingham City have extended striker James Vaughan's loan from fellow Championship side Huddersfield Town until the end of the season.