Cumming has left Chelsea after struggling to break through into the first team.
The Oxford website confirmed the deal for the 24-year-old goalkeeper, who was on loan last season.
Speaking to the club, he said: “I’m very excited to be back at Oxford United. It was a joy to be part of last season’s success and I want to achieve great things again.
“I’m coming back to a place where I feel comfortable and it’s a club that is ambitious and wants to go in the right direction. I learned a lot from my time here and I was desperate for this opportunity to step up and play in the Championship.
“I now need to prove to everyone here that I can play at this level and I’m very confident in doing that. This is a huge opportunity for me and for the club and I can’t wait to get started.”
Des Buckingham, Head Coach, said: “Jamie showed real improvement over his loan spell last season, and he was a very important figure in our successful play-off campaign.
“He produced some big moments for us, particularly in the semi-final over Peterborough United, and we are excited to have him back at the club.
“Jamie already has great experience for his age with almost 200 senior appearances, and we have faith in him that he can continue to develop and be an important player over this time.”