The 33-year-old, who spent seven hugely successful seasons at the Etihad Stadium from 2016 to 2023, has put pen to paper on a one-year contract that includes the option of a further year.
Gundogan joined Barcelona in June 2023 and made 51 appearances for the Catalan giants during the 2023-24 campaign, scoring five goals and providing 14 assists.
However, Barca's financial predicament has ultimately led to the German's swift departure from Camp Nou, and despite interest from clubs in Turkey, Saudi Arabia and Qatar, he wanted to reunite with Pep Guardiola at Man City.
During his memorable first stint as a Citizens player, Gundogan won five Premier League titles, two FA Cups, four EFL Cups, two Community Shields and one Champions League, scoring 60 goals and registered 38 assists in 304 appearances.
Gundogan will wear the No.19 shirt and is available to make his second debut for Man City in Saturday's Premier League match at home against Ipswich Town.
Ahead of Gundogan's return in a sky blue kit, Sports Mole picks out five iconic moments from the midfielder's illustrious career that make him a Man City legend.
Brilliant Barcelona brace in Champions League
Gundogan's first season at Man City was disrupted by injury, but he certainly made his mark and endeared himself to the Etihad faithful for the first time when he scored twice in a crucial Champions League group-stage victory over Barcelona.
Just 13 days after being humiliated at Camp Nou by Lionel Messi, who scored a hat-trick in a thumping 4-0 win for Barca, Man City were silenced by the Argentine superstar once again as he opened the scoring in the reverse fixture at the Etihad.
However, Gundogan was pivotal to the Citizens staging a thrilling comeback on the European stage and securing their first win over Barcelona at the sixth attempt. The German turned in a low cross from Raheem Sterling to restore parity on the stroke of half time, before wrapping up a stunning 3-1 victory with a trademark late run into the penalty box and close-range finish, after Kevin De Bruyne had given City the lead with a sublime free kick.
Not only did that Gundogan-inspired win get Man City's group-stage campaign back on track, it was the most significant win of Guardiola's reign at the time and evidently offered up the rich promise of more to come.
City crowned PL champions after six minutes of madness
It was impossible to ignore the parallels of Man City's final-day drama in 2022 and THAT Sergio Aguero moment a decade earlier. Guardiola's side were trailing 2-0 at home to Aston Villa and were seemingly set to hand the Premier League title to Liverpool, until Gundogan stepped up to provide the goods.
The Citizens looked crestfallen, but they showed their class and character as soon as Gundogan was introduced as a substitute in the 68th minute. The midfielder started the fightback with a towering far-post header on the 76-minute mark, before Rodri drove a low finish from the edge of the area into the bottom corner to level the scores just two minutes later.
City's astonishing title-winning recovery was completed when Gundogan scored his second and the hosts' third in the space of six manic minutes, once again arriving at the far post and this time meeting De Bruyne's low delivery to tap home what proved to be the decisive contribution on a nerve-shredding final day, culminated with scenes of Etihad euphoria.
Gundogan's delightful double helps City close in on another PL title
Gundogan only made the net ripple eight times in 31 Premier League games during the 2022-23 season, but four of those goals were scored in two important victories for Man City in the final month of the campaign.
After netting a first-half brace in a 2-1 home win over Leeds United, Gundogan enhanced his reputation as a man for the big occasion when he scored two fine individual goals and provided an assist in a 3-0 victory away against Everton to help the defending champions close in on a fifth Premier League crown in six seasons.
On his 300th appearance for Man City, Gundogan's first goal was a stunning piece of ingenuity, initially taking Riyad Mahrez's cross on his thigh before flicking the ball, with his back to goal, beyond Everton's Jordan Pickford.
Gundogan then turned provider for Erling Haaland to head home City's second, before the German completed a truly memorable performance by caressing a beautiful free kick from the edge of the area over the wall and into the top corner.
Record-breaker Gundogan inspires City to historic FA Cup triumph
Not long after lifting his first Premier League title as captain of Man City, Gundogan once again showed his knack of delivering in the biggest moments as he netted arguably the most important double of his career in the first-ever Manchester derby FA Cup final in May 2023.
Gundogan required a record-breaking 12 seconds to open the scoring at Wembley with a stunning long-range volley, the fastest goal in an FA Cup final that eclipsed Louis Saha's strike for Everton after 25 seconds against Chelsea in 2009.
Bruno Fernandes equalised for Manchester United from the penalty spot, but Gundogan restored City's advantage six minutes after half time with a volley that squeezed into the bottom corner past a desperately diving David de Gea to secure the Citizens' seventh FA Cup and maintain their treble charge.
Captain fantastic lifts Champions League as City win historic treble
After several heartbreaking exits and near misses, Man City finally expanded their domestic dominance across the continent and ended what Guardiola admitted was an "obsession" to lift a first Champions League trophy, 15 years after Sheikh Mansour's transformative takeover.
The Citizens emulated Man United's feat of 1999 by becoming just the second English club to win a historic treble, following up Premier League and FA Cup triumphs with a narrow 1-0 victory over Inter Milan in the 2023 Champions League final in Istanbul.
While Rodri was their hero on the night, netting the decisive goal in the 68th minute to seal a nervy win, Gundogan played in all 13 of Man City's matches en route to European glory and had the honour of becoming the first player in the club's history to lift Europe's most prestigious trophy.