The 27-year-old has also agreed a three-year contract at The City Ground, which will take effect after the conclusion of his loan agreement.
Fox's arrival should put an end to speculation linking Forest with former Hearts defender Lee Wallace, who now plays in Scottish League One for Rangers.
The former Walsall, Coventry and Burnley left-back has been at St Mary's since 2011, but has only made three appearances this season.
Fox had a brief spell with Celtic, where he played in the Europa League during his six months in Glasgow.
He has four caps for Scotland, and arrives at Forest with plenty of Premier League experience under his belt.
Southampton boss Mauricio Pochettino said: "The first thing I want to make public is my gratitude and thanks to Danny Fox for his professionalism and attitude for my time here at Southampton.
"We want to wish him the best because he's shown great character and great qualities as a player and a person. We wish him all the best at Nottingham Forest and his new challenge there."