"I am especially looking forward to the great fans, who naturally have been key in my decision to return to Bayer."
Chelsea's decision to release Ballack, who has won 98 international caps, sparked a rush to sign the playmaker.
Three Bundesliga clubs - Hamburg, Bayer Leverkusen and Steve McClaren's Wolfsburg - reportedly showed interest in the powerful midfielder, along with Liverpool and Tottenham in the Premier League and at least one Spanish side.
He held talks with Real Madrid's new coach, Jose Mourinho, but negotiations broke down as the Spanish giants were reportedly too slow to make a concrete offer.
Both Hamburg and Wolfsburg offered Ballack more money, but he elected to go to his former club in what has been described in the German press as a "move from the heart".
Ballack played for Leverkusen between 1999 and 2002, scoring 27 goals before moving to Bayern Munich.
He spent four years at Bayern before signing for Chelsea in 2006, going on to make 167 appearances for the Londoners, scoring 27 times and last season helping them to a first title since 2006.
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