The 24-year-old started the opening 2020/21 Premier League game against Brighton & Hove Albion for the Blues, but has struggled for game time since.
Frank Lampard has sanctioned a move for the England international to head to Craven Cottage for the remainder of the campaign.
There is no option or obligation to buy as part of the deal.
One of the issues that could have held up the move was the wages, with Ruben Loftus-Cheek on around £150,000-per-week.
Fulham were never going to be able to pay that figure, but Chelsea will subsidise some of those wages in order for him to make the move.
Lampard insisted that the idea of Loftus-Cheek heading out on loan was so that he could get back in form for when he returns next season.
The midfielder suffered a horrendous Achilles’ tendon rupture in May 2019 and has only featured in ten matches since his return in June of this year.
This is Loftus-Cheek’s second loan spell away from Stamford Bridge, having spent the 2017/18 campaign with Crystal Palace.
He signed a new five-year deal with the Blues in July 2019, and Chelsea will be hoping this transfer reignites his career after the injury.