The deal to bring the 30-year-old Nigeria international to Old Trafford contains no option to buy.
Ighalo, who is still in China but is expected to fly to the UK in the next few days, scored 39 goals in 99 matches for Watford between 2014 and 2017.
"Odion is an experienced player," said United manager Ole Gunnar Solskjaer.
"He will come in and give us an option of a different type of centre-forward for the short spell he's staying with us.
"A great lad and very professional, he will make the most of his time here."
Ighalo moved to the Chinese Super League in 2017, first with Changchun Yatai. After two seasons he moved to Shanghai Shenhua and has scored 10 times in 19 games.
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