Sears, 20, came through the youth setup at Upton Park and scored on his senior debut in March 2008 - the deciding goal in a 2-1 Premier League win over Blackburn Rovers.
He has not scored again for the Hammers in a further 32 appearances, but is considered one of the brightest prospects at the club. He has had loan spells at Coventry City and Crystal Palace, and represented England at U21 level.
Ian Baraclough, the Iron manager, said he had been impressed by Sears' record for West Ham's reserves this season.
"He has looked stronger and quicker than ever, and has been firing for their reserves," he told the Iron's official website.
"We're taking a lad out of reserve team football into first team football and we don't want to put too much pressure on him, but he's a player who will enhance our squad and hopefully he will help the lads up front by chipping in with a couple of goals."
He can play as a striker or a winger, but given the Iron's struggles to score this season is likely to be deployed up front. He will wear the no.10 shirt last worn by Gary Hooper.
Sears is hoping to live up to Hooper's record, and said he was encouraged to move to North Lincolnshire by the experience of Jordan Spence - who spent time on loan at the Iron from West Ham.
"I spoke to Spence, and he said it was a good club. He had a really good time here and I hope I have as much fun as he did," he said.
"I've seen Scunthorpe play a couple of times and watched how Gary Hooper did last year, he got a lot of goals. I've got a lot of pace and am able to run in behind defenders.
"I can play up front and on the wing too, so anywhere that the gaffer needs me really."