The 23-year-old, who joined the Blades from SPL club Aberdeen, has impressed during his short stint at Brammall Lane, having scored 14 times for the Blades in their quest for a return to the Championship.
Blackman is Brian McDermott's fourth recruit in the January transfer window, following in the footsteps of Stephen Kelly, Daniel Caricco and Hope Akpan.
"I'm really looking forward to it and I'm very excited," the new Royals man told the club's official website on Wednesday.
"I met the gaffer last night, he was fantastic with me and I couldn't have asked any more from him and Nicky Hammond. I can't wait to play - hopefully I can try and get involved as soon as possible."
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"We're very pleased to get him," McDermott enthused. "He had options elsewhere but he knows that we try to develop our players and get them better. He's played a lot of games and has so much more to come.
"He can play in three or four positions - up front, either one of the wide areas and off the striker. I believe he can play off the striker, I spoke to him about that last night.
"He's another player that's hungry, wants to learn and wants to improve. His goalscoring record is getting better, better and better every year. He takes set plays, so he's a really good acquisition to the group."