The German departed from City in 2023 after a treble-winning season to join Barcelona but has been allowed to leave the Catalan giants for free after just one season.
Gundogan made over 300 appearances in his first stint in Manchester, winning every trophy available to him while scoring 60 goals.
He also featured 51 times in all competitions last season for Barcelona, helping the club to a second-place finish in La Liga.
Speaking upon his return to City, Gundogan said: "My seven years at Manchester City were a time of pure contentment for me, both on and off the pitch.
“I grew as a person and a player, developed a special relationship with the City fans and enjoyed amazing success. It was an exceptional period in my life.
“To have the opportunity to return here means so much."
Gundogan arrives again at City looking for more trophies as a potential fifth-consecutive Premier League title looms.
The midfielder could make his second debut as early as Saturday, August 23rd when City host Ipswich.
