The 24-year-old winger had been a free agent for a short period of time following his release from Saudi Arabian club Al-Ahli Dschidda.
However, he has now returned to the game by signing a deal with the Bundesliga outfit until the summer of 2018.
"Nabil is a technically strong player who always looks for one-on-one challenges with opponents down the wing. He is also a goal threat from the position he plays," sporting director Peter Knabel told the club's official website.
Bahoui is expected to be a part of the Sweden squad that competes at Euro 2016 in the summer.