Phillips, 23, spent a temporary stint at Morecambe during the Shrimps’ time in League One last term and will continue his education again in the third tier after heading to Shropshire.
The former Everton academy player, who has made 11 appearances for Town, spent previous loan spells at Walsall and Exeter City.
Phillips scored seven goals in 26 appearances in all competitions last term at Morecambe, with his spell cut short by a serious hamstring injury .
Back in the 2021-22 campaign, he found the net on seven occasions during his combined stints at Walsall and Exeter.
The Huddersfield-born attacker is keen to make up for lost time after being recalled from his loan spell at Morecambe in the new year and recently featured on two occasions for Town's B team to bolster his fitness.
Town chief Neil Warnock commented: "Kieran is desperate to play football.
"Ideally I wanted to see more of him for myself before he went out on loan, but he went and picked an injury and he's not been able to show me what he can do really.
"With the end of the transfer window coming so quickly, it's better for him to go out on loan and get some games under his belt."
Sporting director Mark Cartwright added: "There were quite a few clubs interested in taking Kieran, which is no surprise given how he has performed in his previous loans in League One and League Two.
"We all know Kieran has real talent and this move to Shrewsbury is the perfect opportunity for him to take the next step in his career. We all wish him the best of luck there, and we’ll monitor his progress closely."