The 24-year-old is set to be involved as Graham Turner's side travel to Scunthorpe on Saturday.
McGinn joined the Hornets in January 2010 after starting his career at St Mirren, where he made 84 appearances and scored goals against both Celtic and Rangers.
He has made 42 appearances for Watford since arriving at Vicarage Road but has not made a first-team appearance since rupturing knee ligaments in 2011.
The midfielder is hopeful that the move will "get his career back on track" .
"I'm looking forward to getting back playing on a Saturday at 3pm," he told Shrewsbury's official website.
"This is a good league with a lot of good clubs and the standard of training was very good. I was very impressed so I'm looking forward to it."
Turned added: "He picked up an injury at Watford which kept him out action for a while, he's raring to go now and we've taken him on loan until the end of the season.
"He is a good midfield player with a good eye for a pass and he chips in with some important goals."