The versatile defender has made a positive impression at the Memorial Stadium since arriving last month in a bid to get minutes under his belt having fully recovered from a double leg fracture.
Packwood, 20, has scooped the man-of-the-match award twice in four appearances for the Pirates, prompting Rovers boss John Ward to prolong his stay by a further two months to the maximum period permitted.
"We're delighted that Will is extending his spell with us, he's a good player and he's going to grow into a very good player," Ward told the club's official website.
The American rose through the academy ranks at St Andrew's and had made seven first-team appearances before sustaining injury in January's FA Cup third-round tie at Leeds.
Birmingham have the ability to recall Packwood at any time over the remaining period of his loan at the League Two club.