The Blues boss has confirmed that part of the loan deal for the Swedish Under 21 international midfielder is with a view to the player signing a permanent deal at St Andrew's at the end of the season.
However, he has emphasized that a deal is only likely to happen should Blues be promoted to The Premiership this season.
Larsson has made 15 starts and 10 substitute appearances for Blues since joining on a season long loan deal from The Gunners in the summer.