Daniel Ricciardo will be reunited with Max Verstappen at Red Bull
The 33-year-old Australian had been looking for a way to stay in Formula 1 after his McLaren contract was terminated at the end of the season.
He will assist Red Bull with testing and simulation work as well as commercial activities, the team said.
Ricciardo said he was "truly excited" to be returning to the team for whom he won seven grands prix between 2014 and 2018, before leaving for Renault.
Team principal Christian Horner said: "It is great to bring Daniel back into the Red Bull family. He has enormous talent and such a brilliant character.
"I know the whole family is excited to be welcoming him home.
"In his role as third driver, Daniel will give us a chance to diversify, assisting in the development of the air, aiding the team with his experience and knowledge of what it takes to succeed in F1."
A smiling Ricciardo said the welcome he had been given by Horner, Red Bull motorsport adviser and the whole team was "something I'm sincerely appreciative of".
"The ability to contribute and be surrounded by the best team in F1 is hugely appealing, while also giving me some time to recharge and refocus," he added.
Ricciardo spent five seasons with Red Bull and left at the end of 2018 because he felt the team were becoming increasingly focused on Max Verstappen, to his detriment.
He moved to Renault for 2019, on a lucrative contract worth more than $50m over two years, but decided before the delayed start of the 2020 season that he would leave for McLaren in 2021.
Ricciardo scored Renault's first podium for nine years at the Eifel Grand Prix towards the end of the 2020 season, and took a second at the Emilia Romagna Grand Prix two races later.
After joining McLaren, Ricciardo won the 2021 Italian Grand Prix - taking the team's first win for nine years and leading team-mate Lando Norris to a one-two - but for most of the year he struggled to match the Briton.
When those problems continued in 2022, McLaren decided they had to replace him, and negotiated an end to his contract - which had been due to run to the end of 2023 - in the summer. They signed Australian Oscar Piastri as Ricciardo's replacement.
Ricciardo has admitted he does not fully understand why he has struggled for performance at McLaren, and the team feel the same. He decided to take a year out in 2023 rather than sign for a team further down the grid but has said he is determined to return to F1 in 2024.
Ricciardo was a Red Bull junior driver and the company paid for his debut with the HRT team in the second half of 2011, before placing him in their second team Toro Rosso for 2012-13.
He then graduated to Red Bull for 2014, following Mark Webber's retirement, and beat four-time champion Sebastian Vettel in his first season with the team, winning three races to the German's none.
Daniel Ricciardo will be back in the Red Bull driving suit
The relationship between Red Bull's two-time world champion Verstappen and his team-mate Sergio Perez became strained at the penultimate race of the season in Brazil.
Verstappen refused a team order to let Perez by for sixth place at the end of the race to help the Mexican's bid for second in the drivers' championship.
Verstappen said he had his "reasons" for refusing, and they were to do with "something that happened in the past". Perez said it "showed what kind of person" the Dutchman was.
It has since emerged the tension was over Verstappen's belief that Perez crashed deliberately at the end of qualifying at this year's Monaco Grand Prix, securing his third place on the grid ahead of Verstappen. Perez went on to win the race.
Perez described that version of events as "just speculation, and people creating rumours", adding: "That rumour is wrong." He also said he regretted the criticism he had made of Verstappen.
Horner insisted the two drivers have spoken and cleared the air.
Senior figures within F1 have pointed out Ricciardo's presence in the team is a convenient way of keeping Perez in line, as he knows Red Bull have a potential replacement already signed should relations with Verstappen sour again.
At last weekend's Abu Dhabi Grand Prix, when it first emerged Ricciardo would be taking on the role, Horner was asked whether Ricciardo could "become an option longer-term as a race driver".
He replied: "No. Daniel's contract is very specific for a specific reason. We have a contract with Checo for the next two years."
Horner said Ricciardo was joining to help take the load off the race drivers in areas such as marketing - such as show-car runs and events - and would also be used to progress car development on the simulator.
-- Courtesy of BBC Sport