The 29-year-old makes his Molineux return less than a year after he left Wolves to join the Cottagers in September 2015.
In Stearman’s first spell at the club, he made 212 league appearances across three divisions between 2008 and 2015.
The defender was part of the 08/09 side that won the Championship, scoring on the final day of the season against Doncaster Rovers before Wolves lifted the league trophy.
He then helped the Club to maintain Premier League football over the next three years.
Stearman also played a pivotal role in Wolves' 2013/14 season, making 40 league appearances as the Club stormed to the League 1 title.
In his final season at Wolves before moving, the defender won both the Fans' Player of the Year and the Players' Player of the Year.
Speaking after returning to the Club, the centre-half said: “It feels amazing to be back. I think everybody knows what this club means to me.
“When I heard there was a chance it could happen, I didn’t want to let it pass up. I told my agent to make it happen whatever it takes and here I am.
“I’m delighted to be here, ready to crack on and hopefully can help to get us promoted.
“I know people say not to go back in life but why would I not want to come back?
“I had a great seven or eight years here, I spent a large portion of my life at this club and I’ve got nothing but happy memories so I just want to pick up where I left off.
“I’m looking forward to getting back out at Molineux and hearing that roar from the South Bank."
There has been a number of additions to the dressing room since Stearman left for West London last year but the 29-year-old is looking forward to start working with the new faces.
“There’s quite a few new faces in there but there’s some old familiar ones as well so it will be good to get know the new lads and get back out there with the old boys," he said.
“I’ve always looked out for Wolves’ results and kept up to date with how the boys are getting on."
Not getting a chance to say goodbye to the fans was one of Stearman's biggest disappointments about leaving but now the defender is looking forward to reacquainting himself with the Molineux crowd.
He explained: “I think it will be quite emotional.
“When I left I didn’t really get the chance to speak to the fans which hurt me a little bit.
“It will be great that I never really needed to say goodbye because I’m back and I can say hello.
“It’s going to be a great feeling and I’m really looking forward to it."
