Jones, who has made almost 200 appearances for the Grecians, will stay at London Road until the end of the season and Posh manager Darren Ferguson believes the 24-year-old will provide good competition for Joe Lewis.
"Paul is a very highly rated goalkeeper, he is a good age, and is out of contract in the summer so this is a good opportunity to get him in," Ferguson told the club's official website.
"Myself and the goalkeeping coach Barry Richardson would ideally want to work with three goalkeepers and this gives us a chance to get Steve Collis out to play some matches because I have yet to see him play.
"Paul wanted to come down straight away and we are delighted to have him on board. He will provide competition for Joe Lewis, which I think he needs.
"This signing does not mean that Joe will be leaving, I just feel he needs a bit of competition. We have seen Paul play, we know all about him and he will prove to be a good signing for us."
Source: PA
Source: PA