And then Vaughan will sign a permanent contract for a further season, with a one-year option.
Blues have been in talks with Huddersfield and the striker since the expiry of his initial loan on Saturday about a more permanent arrangement.
And negotiations have reached a satisfactory conclusion, with the 27-year-old becoming a Blues player for a longer term after the Standard Loan has finished.
Vaughan was snapped up temporarily by Gary Rowett at the end of last month and made six appearances.
Although he didn't get off the goalscoring mark, Vaughan did an excellent job leading the line in Clayton Donaldson's absence and his work rate and selfless attitude for the team was highly impressive.
On Saturday it was his assist for Maikel Kieftenbeld that resulted in Blues 89th minute winner against Brentford.
Birmingham-born Vaughan grew up in Kingstanding and joined Everton's Academy after the family relocated to the North West due to his parents work.
In April 2005 he became the Premier League's youngest scorer aged 16 years, 271 days - a record that still stands.
Vaughan spent the last three-and-a-half seasons at Huddersfield scoring 33 times in 95 appearances.
James' registration has been submitted ahead of the FA's 12pm deadline, meaning that he should be eligible for tomorrow's FA Cup tie against AFC Bournemouth.