Labbadia was in charge of the club for 10 months before being sacked in April 2010 and has now been tasked with saving them from relegation from the Bundesliga.
The 49-year-old, whose last job was in charge of Stuttgart, becomes Hamburg’s fourth coach of the season, taking over from caretaker boss Peter Knabel.
Hamburg said in a statement on their official website that Labbadia’s deal would include next season regardless of what division the club were in.
The club are bottom of the table, two points off the relegation play-off place and four from safety.
Hamburg chairman Dietmar Beiersdorfer told www.hsv.de: “With Bruno Labbadia we have got a strong coach who is experienced in relegation battles.”
Labbadia met the players and staff on Wednesday morning and added: “I expect total commitment and passion from everyone involved in the coming weeks. We have to work quickly for a successful outcome.”
Beiersdorfer said Hamburg had been unable to agree a deal with former Mainz boss Tuchel, who has been linked with Borussia Dortmund.