Stead returns on a free transfer after leaving Bristol City in the summer, 10 years after leaving the club for Blackburn Rovers.
Town manager Mark Robins said: "Jon's arrival is a step forward for the club ahead of the new Championship season, as we put together our strikers.
"At the end of last season our two loan strikers returned to their clubs, whilst Alan Lee and Lee Novak have moved on.
"We are transitioning that group of strikers and will add players of different types as we form the squad. We need intelligence, we need movement, we need pace and we need presence as well.
"Jon can certainly link the play; he has presence and experience at this level. I have spoken to him about goals; he has always scored consistently but I believe that he can score more than he has done.
Stead joined Championship side Bristol City three years ago and scored 20 goals in 64 starts for the club over two seasons, earning their 'Player of the Year' trophy in 2012.
He also had spells with Sunderland, Sheffield United and Ipswich Town before his move to the West Country.
Stead added: "A few things made my decision an easy one. Obviously I'm a Huddersfield fan and have been since the days I started as a ball-boy here, so this place has a massive pull.
"Me and my family had three very good years at Bristol City and the relationship with the supporters was one I hadn't felt anywhere since I left Huddersfield, so coming back here was the only move that made sense to me once I left there.
"Once I decided to leave Bristol, I made it very clear to everyone that this is where I wanted to be. I had a few other offers, but this is the club I wanted to come and play for and having met the manager and the owner, the decision was made even easier."