The London-born 26-year-old signed a one year extension when his contract ran out at the end of last season, but does not figure in Phil Parkinson's plans. He made his only 2 appearances of the 2006/07 season in the last few weeks during Sam Ricketts' absence, but with the Welsh international fit again and Danny Mills also available, Thelwell is surplus to requirements.
Manager Martin Ling told the O's official website: "Alton brings some experience to our backline, which is something we've been after for quite a while now.
"He has played for Hull in the Championship and Tottenham in the Premiership, and he will be a good addition to our defensive options, especially as he can play both at centre half and right back.
"We've taken him through to the next transfer window but I hope, come the end of that, he will have done a good job and we can sign him permanently."
Thelwell has made 35 starts since joining City on a free transfer from Spurs in 2003, a spell that has been plagued by injuries.