Downing, 26, who joined the Sky Bet League One club on loan in August, has put pen to paper on a deal which will keep him at Ewood Park until at least the summer of 2019.
He has made 18 appearances in all competitions for Blackburn this season and scored his only goal in a 4-2 win at Blackpool in November.
“It’s a great feeling,” Downing said on the club’s official website. “I’m over the moon for it to all get signed.
“It gives me and the club some stability moving forward and I’m hoping for many successful times in the future.
“It’s one of the easiest decisions I’ve made. Ever since I signed on deadline day, it’s been an aspiration of mine to try and make it permanent.”