The 21-year-old winger has made 20 appearances for Hearts so far this season, but has now been allowed to drop down a division to join Scottish Championship leaders Rangers.
King has 18 months remaining on his current deal with his parent club, and manager Robbie Neilson believes that the move will be good for all parties in the long run.
"Billy's at a stage where he's looking for regular game time, and that's not something that we can guarantee at the moment," Neilson told Hearts News.
"We're fortunate to be in the position where we've got an abundance of options on the wing. Sam Nicholson and Jamie Walker - who's almost at full fitness - are two of the best young players in the country and are being pushed all the way by Arnaud Djoum and Prince Buaben.
"The emergence of Dario Zanatta has given us even more options in there, so it makes sense for Billy to go out on loan to continue his development. He'll get a run in a team that is pushing for a title, so it will benefit him in the short term and Hearts in the long run, when he comes back an even more confident player."
King could make his debut for Rangers when they host title rivals Falkirk at Ibrox on Saturday.