The midfielder left the club for Rangers in 2007 but has been training with Pat Fenlon's squad since his release by Middlesbrough in January.
Now the Leith boss is eager to sign up the 28-year-old Scotland international in time for the Scottish Premier League meeting with their city rivals in two days' time.
Fenlon said: "Kevin has made the decision that he wants to play here until the end of the season.
"That's fantastic and we're delighted. The deal hasn't been done yet and obviously with it being outside the transfer window it takes a bit longer to do than a normal transfer.
"If we can get it done in time for Sunday then great, if not we have got plenty of players. The squad we have got at the moment is fantastic and Kevin will enhance it, I've no doubt."
Thomson has endured a nightmare spell since quitting Ibrox for the Riverside two-and-a-half years ago.
The player, who had already suffered two cruciate ligament injuries before heading to the npower Championship side, broke his leg just two games after sealing his £2million move to Boro.
Further injury problems limited Thomson to just 44 games in his first two seasons with the club and his contract was torn up by mutual consent just minutes before the end of the January transfer window.
But Fenlon has no concerns, saying: "The plus point from our side is that Kevin has been in for a couple of weeks and liked what he saw. He's enjoyed it. He's got on really well with the players and the staff. Now he's made the decision he wants to come here for a short period of time, which is great.
"Fitness-wise, he looks fine but he hasn't played much so you when you get into the nitty gritty of playing football matches, it's completely different to training. But from a fitness point of view, he looks fine."
Fenlon had earlier denied Hibs were looking to re-sign the player, claiming cash constraints had tied his hands.
But it now looks as though the player has volunteered to play for reduced terms in order to speed his return to full fitness.
"Nothing has changed on our finances," said Fenlon. "Kevin has made a decision that he wants to play football between now and the end of the season to get himself fit for something bigger further down the road.
"Has he dropped his demands? That sort of thing is between him and the club. I'm just a manager trying to get the best out of the team and he becomes part of that now."
While Thomson will hope to get the paperwork sorted soon so he can taste some of the action against Hearts, Leith teenager Alex Harris is praying the club make a fast start and allow him to experience his first top-team clash with the Jambos.
The 18-year-old midfielder was a late substitute in last weekend's 4-2 Scottish Cup quarter-final win over Kilmarnock.
It was his third appearance for the Edinburgh outfit, but the only way he reckons he get on against the Gorgie men is if Hibs run riot early doors.
He said: "My chances of playing probably aren't the best after last week's result but you never know with an injury or whatever.
"The result comes first and maybe if we're doing well, I might get a chance at the end. We're unbeaten against Hearts this season, so three or four goals would be great and allow me to get on!
"It would be great to make my first appearance in a derby match. I've been surprised to get some game time over the last few weeks. But it's come at the right time with the derby on Sunday."
The boyhood Hibs fan actually grew up on the doorstep of their Edinburgh neighbours' and admits he has taken his fair share of stick since Hearts 5-1 Scottish Cup final triumph last may.
A win tomorrow would soothe the wounds inflicted by those painful barbs, though.
"I'm from the west of the city, near Gorgie. Growing up, I've had to put up with Hearts fans going past my door after their home games," he added.
"I remember when they had their cup final parade in the summer - I made sure I was well out of the area that day.
"It wasn't the best result last year. I've seen a few Hearts fans since when I've been out with my Hibs tracksuit on and they've given me a few 5-1 shouts.
"It's not been too bad, though. I've enjoyed the banter. We're in the semi-finals this year, so hopefully this will be our time. We're also unbeaten against Hearts this year so hopefully that continues."