The Saddlers attempted to extend McLoughlin's stay in the West Midlands but Dons boss Karl Robinson wanted the 21-year-old back in Milton Keynes as cover for David Martin.
McLoughlin said on Twitter: "Won't be going back to Walsall on loan needed back here! Wish the lads and fans all the best for rest of season! Been a pleasure £cheers."
McLoughlin played his final match for Walsall last weekend as the Saddlers drew 1-1 at home with Notts County.
The former Ipswich trainee made six appearances for the Dons' npower League One rivals after joining them in mid-January.