Last summer, Cummings left Hibernian for the City Ground but after just one goal from 14 appearances in the Championship, the striker returned north of the border to represent Rangers.
Forest have now opted to allow the 22-year-old to spend the next year at Peterborough in order to gain regular first-team football in the EFL.
Manager Steve Evans told the club's official website: "I am delighted to sign Jason. When you sign a player of the calibre of Jason from a club the size of Nottingham Forest, you have to give credit and thanks to our chairman Darragh MacAnthony for sanctioning the move.
"When you take into consideration that we will be paying the full wages for Jason, recognition has to be given to Darragh and the board of directors.
"The board have once again given me wonderful support. I would also like to thank the Nottingham Forest manager Aitor Karanka for his help in making the move possible. Jason has a real work ethic and has a great habit of scoring goals. For me it is an outstanding addition to an already talented squad and I look forward to working with him."
Cummings becomes the 11th incoming at Peterborough ahead of the new season.