Tanaka was one of the stars of the Otago side last year, helping the team to make the premiership final, when it lost to Counties-Manukau.
Otago coach Tony Brown said Tanaka had signed a contract this week.
Brown said it was a good move for Otago to welcome back the Japanese international.
''He is one of the best halfbacks in the world. Not many players are good enough to keep an All Black on the bench,'' he said.
Tanaka (28) has started the past couple of games for the Highlanders, with Aaron Smith on the bench.
Hooker Shota Horie, also a Japanese international who played for Otago last year, will not be back in the blue and gold this season as he has signed another contract with the Melbourne Rebels and has commitments to the Australian franchise.
Fellow Japanese winger Akihito Yamada has arrived in Dunedin and played his first game of club rugby last Saturday for University A.
Brown said Yamada (26) had wanted to experience New Zealand rugby and had come to Dunedin to do that. He was coached by Brown at the Panasonic Wild Knights.
Brown said Yamada was available for Otago but he would be like everyone else and have to impress in club rugby.
Meanwhile, former Highlanders and Otago loose forward Ezra Taylor is back in Dunedin and will turn out for Harbour tomorrow.
Taylor (30) is back in Dunedin after a career which has taken him all over the world. He will play lock for the Harbour side in its match against Zingari-Richmond tomorrow.
Taylor, then a No 8, played eight games for the Highlanders in 2007. He was picked for the Highlanders in 2008 but did not play because of a knee injury.
He played 14 games for Otago, making his debut in 2006.
After leaving Otago before the 2008 provincial season he played for various clubs around the globe.
He played for the Reds for two years in the Super 14, qualifying for the Australian team as he was born in Australia, before heading to Ireland to play for Connacht in the then Magners League.
He also played for Worcester Warriors in the English Premiership.
Taylor has been hampered by injuries throughout his career. His Highlanders career was cut short after he injured his knee.
Brown said Taylor had contacted Otago a few weeks ago, keen to have one last attempt at first class rugby.
He had not played for more than a year, attempting to get his body right. He was working as a personal trainer in Dunedin.
The first game for Otago will be on July 24, against a Sassenachs XV, made up of Otago players, taking on a Spartens XV, a team of Southland representatives, at Forsyth Barr Stadium.
Further warm-up games will be against Tasman, in Nelson, on August 4, while Southland will be the opponent on August 9 in Gore.
Otago's first game in the ITM Cup is against Bay of Plenty, on August 18.
