The 20-year-old only moved to the Middle East last year when Al-Sadd paid Velez Sarsfield £10million for his services.
But now Birmingham have held off stern competition to secure his signature on loan for the rest of the season after which point he is expected to seal a permanent deal.
"I had a good trip over, and I am very happy to be going to Birmingham," he told skysports.com.
"I am excited about this move."
. Zarate's representative Christian Otero has tipped his charge to be a big success in the Premier League.
"He is an outstanding player and he will show that," he told skysports.com.
"He is really looking forward to coming over and we are all excited for him.
"He wanted to leave Qatar and is delighted to be back in a big league."