The full-back will return to The Hawthorns from Dynamo Kiev with a view to earning a permanent transfer.
Popov, who made 13 appearances last term, apologised in February after he was sent off for spitting at Tottenham's Kyle Walker.
Albion manager Steve Clarke told the club website: "It was always our intention to get Goran back over the summer.
"He knows what the club's about and we know what he's about. He's a good player and it makes sense to bring him back.
"He understands the Premier League better now as well and we will look for even more from him next season."
Popov becomes West Brom's second signing of the close season following the arrival of Nicolas Anelka.