Loughner has pleaded not guilty to 49 charges from a mass shooting Jan. 8 that killed six and wounded 13, including Tucson Congresswoman Gabrielle Giffords (D-Ariz.).
The psychologist, Christina Pietz, testified that the drugs Loughner has forcibly been taking for schizophrenia have stabilized and improved him to the point of being able to stand trial. Loughner's lawyers contend his mental health prevents him from competently standing trial due to an inability to comprehend his actions.
Pietz testified that Loughner, 23, understands he killed people and feels remorse about it.
Prosecutors requested that Loughner extend his stay at a Springfield, Mo., prison facility for eight more months.
Loughner remained on suicide watch at the facility.
"He has already made improvements, and he has only been on medication for 60 days," said Pietz in court. "Given the progress he has made today, I have no reason to think he wouldn't continue to make progress."
Loughner's lawyers have been seeking to have the judge, rather than the prison, decide whether Loughner should be medicated.
Loughner was first forcibly medicated between June 21 and July 1, but an appeals court temporarily halted the medications after defense lawyers objected.
The forced medication resumed July 19 after prison officials concluded Loughner's psychological condition was deteriorating, noting he had been pacing in circles near his cell door, screaming and crying for hours at a time.
Defense lawyers have repeatedly asked Burns and a federal appeals court to halt the forced medications.
If Loughner is later determined to be competent enough to understand the case against him, the court proceedings will resume. If he isn't deemed mentally fit at the end of his treatment, Loughner's stay at the facility can be extended. There are no limits on the number of times such extensions can be granted.
The Associated Press contributed to this report.