The Chelsea forward joined the Saddlers in the summer on a six-month deal and has proved an impressive addition to Dean Smith's ranks, scoring four goals in 24 appearances in all competitions.
Manager Dean Smith said: "I am delighted that Chelsea have allowed Milan to continue his development with us. He is getting better each week and has a hunger to learn and improve.
"Thankfully Chelsea see this as the right place for him to be able to do that and I look forward to continuing to work with him and help him develop, while at the same time he plays his part in maintaining our challenge at the right end of the table during the battles which lie ahead."
Lalkovic, a Slovakia Under-21 international, is still to make his first-team debut for Chelsea but has enjoyed three previous loan spells all over Europe.
However, it is at the Banks's Stadium where he has gained the most game time and he is keen to continue to help propel Walsall towards their target of a place in the League One play-offs.
"I have said many times that I wanted to stay here," Lalkovic added. "Being here has really benefited me and I feel I can keep improving under the gaffer and Richard O'Kelly (first-team coach).
"I am pleased that this deal has now been sorted and I can concentrate on my football and helping the club achieve more points."
The Saddlers are currently seventh in League one, just one point outside the play-offs.