The 27-year-old striker rejoins Donny two years after he left the club for Southampton.
He struggled to earn a regular spot with the Saints, spending last season on loan at Nottingham Forest and the first half of this season at Reading.
Rovers manager Paul Dickov told the club website: "I'm delighted to bring back Billy to the Doncaster Rovers. I've been looking to bring in an experienced Championship striker who is capable of winning matches for the club and Billy is that type of player.
"The fact that Billy knows the club so well and has such a fantastic relationship with the fans will hopefully mean he can hit the ground running straight away."
Originally from Sheffield, Sharp tweeted this afternoon: "No better feeling driving north knowing you haven't got to drive back in 2 days."
In his previous spell with Donny from 2009 to 2012 he scored 41 goals in 86 games.