The USA international, 27, restricted to only three appearances for Bolton this season due to injury, will stay with the Owls until April 24 and is in contention for Saturday's derby clash with Barnsley at Hillsborough.
Holden was named Bolton's player of the year in 2011 after moving to the Reebok the previous year from Major League Soccer side Houston Dynamo, but has been dogged by successive knee problems that started when he was seriously injured by Manchester United's Jonny Evans in 2011.
Wednesday boss Dave Jones told BBC Radio Sheffield: "He just wants to get going again, that is the most important thing to him.
"He's quality on the ball, he's got an eye for a goal and if he hadn't had the injuries he's had then we wouldn't have been able to get him."
Holden sustained the initial injury in March 2011 in a challenge which earned Northern Ireland defender Evans a red card, and made his comeback after surgery the following September.
But Holden, born in Scotland but raised in Texas, required further surgery due to a cartilage problem and was sidelined for a further six months.
Holden had previously suffered a broken leg following a tackle by former Manchester City midfielder Nigel De Jong during a friendly international against Holland in March 2010,.
Holden is the Owls' second signing in as many days following the arrival of Hull midfielder Seyi Olofinjana on loan until the end of the season.
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- Jonny Evans