McCarthy had been due to return to Reading this week.
“Alex is an outstanding talent and wants to continue his development by playing regularly at the highest possible level,” Reading director of football Nicky Hammond told the club’s official website.
“With Adam Federici in such fine form, this further spell will help Alex greatly and will not weaken our first team.
“Indeed, with Mikkel Andersen we have another exceptional goalkeeping talent and may well have to develop similar plans in the future to assist Mikkel’s continued progress.
“Both Alex and Mikkel have made it clear to me that their goal is to be first-team regular at our club, which could not be better for us.”
“I’d like to thank Brian McDermott at Reading for allowing Alex to stay on here for another month,” Leeds manager Simon Grayson told the club’s official website.
“He has done very well for us in the time he has been here, he’s a fantastic young goalkeeper, and we’re grateful to Reading for allowing him to stay on.
“We have a number of games coming up and by keeping Alex it enables us to have plenty of options in that area.”
