With a year left of his contract, the 29-year-old was made redundant by Scottish Premier League rivals Hearts after refusing a pay cut, paving the way for his return to Fir Park after two seasons in Edinburgh.
Sutton, 29, was brought to Motherwell, from St Mirren, by former manager Mark McGhee in 2008 and spent three seasons in his first spell with the Steelmen.
The Englishman netted 44 times in 115 appearances in Claret and Amber and became Stuart McCall's third signing of the summer after the arrival of Iain Vigurs and Paul Lawson from Ross County.
Sutton, who will wear the number nine shirt, said: "Obviously there has been plenty going on over the summer but I am just glad it has been sorted out now.
"It's good to be back, good to see some familiar faces and there's a lot to look forward to.
"I wasn't desperate to leave here last time and I was glad of the opportunity to come back again and work with the manager and the staff who always made me feel welcome any time I returned.
"Most of the fans were kind to me when I left and were brilliant with me when I was here so it was a no brainer. I felt at home here last time, I enjoyed coming to work every day and I am sure that will be the case again now."