Financial terms were not made public.
Valdes, who was traded to Seattle Aug. 18 for a pair of minor leaguers, went a combined 8-12 with a 4.18 ERA in 31 starts for the Rangers and Mariners last season.
He signed with Texas as a free agent by Texas in January 2002. He was 6-9 with a 2.93 ERA in 23 starts for the Rangers.
Valdes rejoins a rotation that was 12th in the American League with a 5.15 ERA in 2002.
Texas is not expected to re-sign veteran free agent lefthander Kenny Rogers, who led the team with 13 wins.
"We are pleased that Ismael Valdes has decided to return to the Texas Rangers," said General Manager John Hart. "He did a great job for us over the first four months of the season and, with any luck, could have won another five or six games. With Chan Ho Park and John Thomson, this gives us three guys who can be very effective at the front end of our rotation."
Valdes joins an overhauled staff that has added Aaron Fultz, Thomson, closer Ugueth Urbina, and Esteban Yan in the offseason. Texas also has added catcher Chad Kreuter and outfielder Doug Glanville.
Valdes has a career mark of 80-86 with a 3.76 ERA in 255 games with Los Angeles, the Chicago Cubs, Anaheim, Texas, and Seattle.