The Australia international, who played for the Lions between 1998 and 2004, has signed a contract that will expire at the end of the season.
In a statement on their official website, the club said that the 38-year-old finalised a medical before putting pen to paper on a deal following talks with manager Neil Harris and chief executive Steve Kavanagh.
Cahill is still highly-regarded among the Millwall faithful, despite leaving the club 13 years ago to embark on an eight-year stint at Everton.
The Aussie, who scored 57 goals in 251 appearances during his six years at The Den, will be presented to the crowd prior to Tuesday night's Championship game against Derby County.
Since 2012, Cahill has played for clubs in the United States, China and his homeland.