The 17-year old midfielder, who was the Union's first Homegrown Player signing, will head to the Rhein-Neckar Arena on January 7 and will spend all of 2013 with Hoffenheim.
Union head coach John Hackworth feels it is a great opportunity for the highly-rated Pfeffer, who has played for the US at youth level, to fast-track his development in a more professional environment.
"Loaning Zach to Hoffenheim is a win-win situation for all parties involved," Hackworth said in a statement.
"While we will miss Zach for the 2013 season, we know that the experience at this stage of his maturation process will be invaluable to both him and the club for the future."
Pfeffer added: "The main thing is I need a place to play games - most importantly, good, competitive games. In [Major League Soccer's] Reserve League, we have 10, and that's really not enough - not even close to enough.
"I think the [Union] is looking out for me and really wants me to develop, so I can be a big part of this team in the future."