Oxford, 19, made three Bundesliga appearances while at the Borussia Park – including most recently in Matchday 17's 3-1 win against Hamburg – and one outing in the DFB Cup.
"We were informed of their decision to activate the clause and recall him this morning," said Gladbach sporting director Max Eberl on Friday. "However, we continue to be in talks with West Ham regarding Reece Oxford completing a permanent move to Borussia. It is also the player’s wish to stay at Gladbach."
Watch: Click play to hear Oxford discuss Gladbach's fans