Donley spent the first half of the campaign on loan at Stoke City but has struggled for game time and was recalled by his parent club on New Year's Day.
The 20-year-old appeared just four times for the Potters, managing one assist.
Football League World have reported that the Northern Ireland international is set to sign for Oxford for the rest of the season with the final details of a deal being ironed out before signing in the coming days.
The Telegraph's chief football correspondent Jason Burt has also said that the move will happen.
The U's currently sit 23rd in the Championship table, three points from safety, and are in need of refreshment in the squad if they are to survive relegation.
A product of Spurs' academy, Donley would link up with fellow Tottenham player Will Lankshear at United, potentially igniting some chemistry which will help a struggling Oxford attack unlock defences and create more chances.
The versatile midfielder enjoyed a successful season on loan at Leyton Orient in League One in the previous campaign, managing eight goals and 10 assists in his first loan spell away from North London.
Donley would be the third player to join the U's on loan from Spurs in two seasons after Lankshear and Dane Scarlett.