The 20-year-old central defender joins United having helped Leicester win promotion back to the Premier League as champions last season, with previous loan spells to his name at Doncaster Rovers and Rochdale.
The U’s are delighted to bring in a player of his quality after beating off significant interest from other Championship clubs to complete this loan signing.
Nelson is viewed as one of the country’s most gifted young defenders, with four caps to his name for the England Under-20 side.