Yao, who missed the entire 2009-10 season due to reconstructive surgery on his left foot, could have terminated his contract early and become an unrestricted free agent, but chose not to do so.
He is set to make $17.7 million next season.
"We're excited to have Yao Ming back. He's the centerpiece of the Rockets for many years, the foundation of our franchise," Houston General Manager Daryl Morey said.
"The foot feels OK. Everything is positive," Yao said. "When training camp starts I believe I will (be ready)."
The top pick in the 2002 draft has averaged of 19.1 points, 9.3 rebounds and 1.9 blocks in 481 career games.