The 21-year-old becomes the ninth signing of the summer and the fourth in six days.
Phillips has made 11 competitive appearances for the Terriers, making his full debut in January against Plymouth in the FA Cup.
Saddlers head coach Matt Taylor said: “His ability to score goals is something that really attracted us to him.
“He is an intelligent footballer and he is a very good finisher.
“He has had exposure with Huddersfield in the first team so he has had a taste of what it is like to be in a first team and his ambition that he backs himself to come here and score some goals and provide competition at the top of the pitch so we are extremely pleased to be able to add him to the squad.
“We want to help him, of course we do. We want to help him become a better footballer on the pitch and we will try our best to do that.
“With players who play at the top of the pitch, the main development is movement which is already good. We will look to improve his decision making.
“We want to help his ability to go cold in the real big moments in matches and be relaxed in front of goal.
“I think what he will also find here is that we have a group of players that will also help him and he will learn from those more experienced players in the building.
“Our job is to help him but I am sure he will learn from his fellow team mates as well.”
The loan move is subject to FA and EFL clearance.