The 27-year-old former England youth international was recalled from a spell at Southampton to complete the move.
Doncaster-born Holgate has been at Everton since 2015 but has not played for the Toffees this season.
“Mason’s desire to come here and join our fight is huge for me,” said Sheffield United boss Chris Wilder.
“He’s got a point to prove, he’s a local lad who knows what Sheffield United are all about, he has his finger on the pulse and knows what to expect here.
“He’s got valuable Premier League experience and can play all across the back which gives us options.”
Holgate is Sheffield United’s third signing of the January transfer window after former Blackburn striker Ben Brereton Diaz, who has joined on loan from Villarreal, and Croatia goalkeeper Ivo Grbic.
“I’m delighted to be here and to finally get it over the line,” Holgate said.
“I’ve been waiting all month to get it sorted, obviously involving three teams, it is a little complicated but now we’ve got it to this point, I cannot wait to get going.
“I feel good, sharp and ready to go. This is the best league in the world that’s why everyone aspires to play in it, I’ve played in it a bit now and hopefully I can come in and help the boys.
“Chris [Wilder] has faith and believes in me, he has told me what he thinks I can add to the team and I think I can do that so it makes sense to make this happen.”