The 24-year-old has made eight appearances for the League One club since joining last month and he will now remain with the club until at least the end of November.
"The crucial thing was we wanted him to play in the FA Cup. It would have been no good renewing his loan this week if he wasn't allowed to do that," Shrewsbury boss Graham Turner told the club's official website.
"But Keith Hill, the manager of Barnsley, has allowed him to play on Saturday so we've re-signed him and it's all gone through.
"Lee's done okay but I think he can be better. He's not played too many first-team games this season so he's been feeling his way into things and he's done alright. He's teamed up with Darren Jones and they look a decent partnership."
Shrewsbury currently sit 20th in the League One table.