Brandy departed the Banks's Stadium in the summer as a free agent after rejecting a new deal and instead penned a two-year contract with League One rivals Sheffield United.
However, he has struggled to establish himself as a first-team regular at Bramall Lane this term, making just 10 starts amid a total of 15 appearances in all competitions without a goal.
And Saddlers boss Dean Smith has now moved to bring him back to the midlands.
"I am really pleased to get Febian back," Smith said. "He is a player who has done very well for me in the past.
"He knows how I work and I know what makes him tick, so it's a good fit.
"He enjoys this part of the season. The players were keen for him to return and he will bring energy and drive to us.
"He's a bubbly character who scores goals and creates chances and I am sure that he will have a big role to play between now and the end of the season."
Brandy, 24, started his career with Manchester United before being released in 2010.
He enjoyed spells with Notts County and Greek club Panetolikos before joining Walsall in the summer of 2012, making 37 appearances last season and scoring seven times.
Brandy is available to make his second Saddlers debut in Tuesday night's home clash against Oldham.
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