The midfielder, who left Ewood Park for Palace during 2011's January transfer window, returns north for an undisclosed fee.
The transfer reunites Marrow with Gary Bowyer, who has graduated from reserve-team boss to manager in the 23-year-old's absence.
"Alex is someone I know well from back in the youth and Reserve team days here," Bowyer told the club website.
"He's another player who I feel didn't fulfil his potential here. He was hungry to come back here and make his mark, which he was unable to do the first time round. That hunger and desire is what we need."
Marrow, who did not make a first-team appearance during his first spell at Blackburn, featured just four times for Palace during their promotion-winning season.
He spent time on loan at Fleetwood following a spell at Preston the previous season.