The West Brom midfielder joined a month ago on for an initial one-month deal.
The 21-year-old has made four appearances for Pompey, scoring one goal in the defeat against Leyton Orient, but missed three games after receiving a red card against Notts County in the FA Cup.
Caretaker boss Guy Whittingham told BBC Radio Solent: "I am pleased to get that done. He can be influential has got good ability, can see a pass and unlock defences."
Allan, who had a spell at Fratton Park last season, has yet to appear for the Baggies' first team.