The German international had agreed to join Spurs when his contract with the Bundesliga outfit expires at the end of the season.
However, with the Premier League side struggling with injuries in midfield, the transfer has been pushed through for a figure in the region of £1.5m, according to Sky Sports News.
A statement on the Spurs website read: "We are delighted to announce that we have reached agreement with Schalke for the immediate transfer of Lewis Holtby.
"The Germany Under-21 captain, who had already agreed terms to join the club this coming summer, has made 27 appearances for the Bundesliga side this season scoring four times.
"Capped on three occasions by the senior German national side, the versatile midfielder joined Schalke in 2009 from Alemannia Aachen and was loaned out to Bochum and Mainz prior to making his breakthrough with the Gelsenkirchen-based club. Lewis has made 160 appearances in his career to date, scoring 29 times."
Holtby could make his debut for the club in Wednesday's league clash with Norwich City.