Iron target makes Ipswich switch
Boss Nigel Adkins revealed his interest in the 23-year-old striker on Thursday, and United had placed a bid for the nine-goal hitman.
However, Walters - who enjoyed a short loan spell at Glanford Park in early 2005 from Hull - has agreed a move to Portman Road and adds to the United boss' growing transfer frustration.
Scunthorpe have had two bids rejected for York City striker Clayton Donaldson.
And on-loan Sheffield Wednesday forward Drew Talbot - whose stay United were looking to extend until the end of the season - joined Luton Town for £250,000 on Friday.