The 29-year-old, who made 153 appearances for the Gunners from 2004 to 2008, returns to the Emirates Stadium after five seasons in Serie A with AC Milan, having become a free agent earlier in the summer.
Arsenal manager Arsene Wenger is confident versatile Flamini - who played at left-back in the 2006 Champions League final defeat to Barcelona - will settle quickly into life back at his old club, having spent some time training at their Hertfordshire base this month.
"We are very pleased Mathieu has agreed to rejoin us," Wenger said on www.arsenal.com.
"He is a player of real quality, with a fantastic work rate and great mentality.
"As we know, Mathieu is a strong midfielder, but is also is comfortable playing in defence too. He is a very good addition to our squad."
Arsenal are expected to make more moves ahead of the September 2 transfer deadline, with Wenger's squad depleted further by the news Germany forward Lukas Podolski could be out for up to 10 weeks with a hamstring injury.
Despite bids for Gonzalo Higuain, Luis Suarez and Yohan Cabaye, so far France Under-21 forward Yaya Sanogo was the only other confirmed new recruit - and that also on a free transfer.
Arsenal continue to be linked with the likes of Karim Benzema, Mesut Ozil and Angel Di Maria at Real Madrid, along with Juventus forward Fabio Quagliarella, Chelsea playmaker Juan Mata and St Etienne defensive midfielder Josuha Guilavogui.
Wenger maintained the search goes on for new talent.
"When you think that we lost three players of the stature of (Mikel) Arteta, (Alex) Oxlade-Chamberlain and Podolski for three months basically before the season really starts, it's very hard to take.
"We are in a position where you want some more players."
Flamini may have left Arsenal under somewhat strained terms as the player ran down his contract, but Wenger is confident he returns very much with plenty more to give.
In an interview with Arsenal Player, Wenger added: "He is a bit older, but he is still only 29. The best years are in front of him now - the next three years.
"Physically, he is perfect. He was tested, prepared and he is physically in fantastic shape.
"He knows how we play football, knows the club and had a huge desire to come back.
"He was available because he was out of contract and he is a quality player, and a focused player.
"Those were all the reasons that pushed me to make that decision."
Given Arsenal's injury problems, Flamini could go straight into the squad for the north London derby against Tottenham.
However, Podolski will be out until toward the end of the year.
The Germany international, who scored twice in the 3-1 Barclays Premier League win at Fulham last weekend, hobbled off during a 2-0 defeat of Fenerbahce as the Gunners progressed to the Champions League group stage.
Tests have revealed Podolski is now set for a prolonged spell of rehabilitation, which will further stretch Wenger's already depleted squad.
"It is bad news about Lukas Podolski as he will be out for eight to 10 weeks," said Wenger.
"His hamstring is much more damaged than we thought at the start.
"It is very disappointing and we have paid a very heavy price for that win [over Fenerbahce]. We have to be patient now."
Midfielder Aaron Ramsey scored twice against the Turks, but finished the match on the bench with a groin problem after Arsenal had used all three substitutes, while Jack Wilshere's fragile ankle was a cause for concern after he was the victim of some meaty tackles.
However, Wenger suggested both men should be fine for Sunday.
"The news is quite positive. They just had bumps and bruises. They will be involved," he said.
Midfielder Arteta and captain Thomas Vermaelen continue their recovery from respective thigh and back problems.
Wenger added: "Arteta is doing okay, but there are few weeks to go with him. Thomas Vermaelen could be back after the international break."