Mkandawire will join up once more with Shrews manager Graham Turner, under whom he spent four years at Hereford United.
"The move had been in the mix for a little while," BBC Sport quotes Mkandawire as saying. "There was a lot for me to contemplate, moving from London, but it's the right decision for me and my wife and we've got a child on the way.
"That's a massive pull for me to come and play for him again and hopefully we can be as successful as we were the last time."
Mkandawire has made 353 career appearances, scoring 34 goals.