Grounds, who has been with Blues since 2014, last appeared for the First Team in the 2-0 defeat away at Wolves in April 2018.BCFC
The 30-year-old is surplus to requirements, as Garry Monk earlier this summer brought in Danish left-back Kristian Pedersen.
Monk has cover for the position in the form of Maxime Colin, Josh Dacres-Cogley and Steve Seddon.
Grounds, who has been with Blues since 2014, last appeared for the First Team in the 2-0 defeat away at Wolves in April 2018.
It was his return to the team after suffering a knee injury in December, which kept him sidelined for four months.
To date, he has made 170 appearances for Blues.
Bolton, who are managed by Phil Parkinson, have won one and drawn one of their opening 2018/19 league fixtures.
Under the terms of the loan, Grounds will not be allowed to face Blues for Bolton.