"Soon as it hit the wire that I was released, I got a call from the black and gold," Gay told reporters Monday. "That put a smile on my face -- knowing the team that drafted me wanted me back."
Financial details of the contract were not disclosed by the team. Gay's agent had earlier announced on Twitter that his client had re-signed with the Steelers.
Gay spent the first five seasons of his NFL career with the Steelers, but signed a two-year, $4.95 million deal with the Cardinals last offseason.
"Thrilled that William Gay has signed to return to the Pittsburgh Steelers. Had other options, but his heart is with Steeler Nation," agent Jerrold Colton tweeted earlier Monday.
The move to bring back Gay lessens the blow of the expected loss of Keenan Lewis to free agency. If Lewis leaves, the Steelers will likely promote nickel back Cortez Allen to the starting lineup opposite Ike Taylor.
Gay thrived while playing as a nickel back for the Steelers in 2011, finishing with two interceptions, a career-high 14 passes defensed and two fumble recoveries.
"I came in to win," Gay said, according to the Post-Gazette. "Just to be back with your family, the guys you grew up with in this league, that's going to be fun."
Gay started 15 games for Arizona last season. He had 60 tackles, one sack and two interceptions.
Before that he appeared in 80 games for the Steelers, starting 15 games for Pittsburgh in 2011.
Information from ESPN.com's Jamison Hensley and The Associated Press was used in this report.