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The 35-year-old played his last game for the Crusaders in 2019 after 151 matches and three straight titles before heading to Japan to play for the Kubota Spears.
Crotty said he was coaxed back to Christchurch by a mix of family and rugby connections.
"I have so much love for this team, it's hard to put into words how much it means to me," Crotty said.
He was spotted training with the Crusaders late in the 2023 season, and fronted for Canterbury in the Bunnings NPC, playing nine matches and helping the side make the finals.
"Japan was great, a really good experience, but it felt like time to come home.
"Young family life, you know, it's so precious to spend more time with the kids - they didn't travel with me to Japan for that last season, so I'm hugely grateful to be here."
Crotty was Crusader No 134 and part of the 2009 team which included Brad Thorn, Kieran Read, and Richie McCaw.
"Christchurch and the Crusaders are home for me and I'm just really excited to reconnect with some special friends," he said.
Crotty captained the Crusaders in the 2014 season and was named vice-captain to Matt Todd in 2017. Scott Robertson took over as coach in 2017 and the Crusaders won the first of their seven titles in a row.
Crusaders head coach Rob Penney said Crotty was "a great pro and legend of the club" who will undoubtedly play an important part in the Super Rugby Pacific season.
"He decided the coals were still burning hot for another campaign, and we were of course very enthusiastic about him coming back into camp," Penney said.
"His knowledge, his experience, his passion for this place - it's boundless.
"He's been a cornerstone of this place for a long time, helped to form the culture we have here, and is a leader both on and off the field."