Sheehan has completed the necessary paperwork at Luton's Kenilworth Road and could now be in line to make his Hatters debut away at Mansfield Town this Saturday.
The Irishman played the first half of City's 3-2 victory over Port Vale in the Final Third Development League on Tuesday, scoring the Bantams' second in a 3-2 victory.
Sheehan has spent most of this season so far on loan at Notts County, playing for the Magpies between the end of September and Boxing Day.
The 29 year-old has made three appearances for City during this current campaign, the last of which came at home to Gillingham back in August.