Horvath joined Nottingham Forest a year ago on a free transfer from Club Brugge, where he won three Belgian league titles.
The loan move follows confirmation that Forest have signed Manchester United goalkeeper Dean Henderson on a season-long loan.
Serving as the backup keeper, Horvath made only 11 appearances for Forest, but helped the club gain promotion back to the English Premier League.
Luton Town plays in the Championship.
"I was really impressed with him in terms of what he's done," Luton Town manager Nathan Jones said. "We were aware of him, then he went to Forest and he did well in the limited amount of time he had to play."
Horvath has eight caps for the U.S., and hopes to make the squad for the World Cup in Qatar.
However, sources have told ESPN that Steffen is close to a loan move to Championship side Middlesbrough in order to get first-team minutes ahead of the World Cup.
Information from ESPN's Kyle Bonagura was used in this report.