Sky Sports revealed earlier on Monday that the forward was heading for Portman Road.
The 27-year-old was transfer-listed by Peterborough last week after allegations that he breached club discipline.
Town boss Mick McCarthy has beaten off stiff competition from a number of Championship rivals to land Posh's record signing, who has scored just once in 10 appearances this season.
The two sides meet at Portman Road on Saturday but Barnett, who becomes the Tractor Boys' eighth loan signing, will not be eligible to play.
While his debut will have to be delayed, Barnett is looking forward to taking on a new challenge.
He told Ipswich's official website: "I got a phone call this morning saying Ipswich wanted me and it was a nice surprise.
"It's been a difficult week, with what's gone on, so I'm looking at this as a new start and the chance to get back to playing football and enjoying my football as well.
"I've not done that as much as I would have liked this season. Ipswich have given me a chance to come here and play some games and hopefully score some goals and that's what I'm looking to do.
"It's a fantastic football club. I have some good memories of the place after scoring here last season in one of my first games. Now I want to score goals for the club and I can't wait to get going."