The versatile 25 year old, Renaud as a right-back, has played all across the back four during his time in West London, having played for both Arsenal and Fulham.
Town had earlier agreed a fee with Fulham, with prices ranging from £250,000 up to £500,000 mentioned for the German to sign on a permanent transfer. However after much thought, he decided against the move.
Volz will now be in contention for Saturdays clash with Watford, which will be welcome news for Jim Magilton, as Town's usual right-back, David Wright, is a doubt.
Alex Bruce will also miss the game through suspension, following his red card at Wolves.
Jim told the official club site:
"We're delighted that Moritz has joined us and he will be in the squad for Saturday's game against Watford," Town boss Jim Magilton confirmed to the Club website.
"He's a top professional who has spent his career in England playing at Premier League level. He's believes he is a Premier League player. I believe that as well so we have got a very good player on our hands.
"He will add some extra quality to the squad and is another step towards taking us where we want to be."