Gundogan has signed a one-year contract with City, having left for Barcelona 12 months ago.
“My seven years at Manchester City were a time of pure contentment for me, both on and off the pitch,” Gundogan said.
“I grew as a person and a player, developed a special relationship with the City fans and enjoyed amazing success. It was an exceptional period in my life.
“To have the opportunity to return here means so much.
“Everyone knows the respect I have for Pep – he is the best manager in the world and working with him every day makes you a better player. You feel constantly challenged, which for any professional is exactly what you want. I cannot wait to work with him again.
“And what can I say about my teammates here at City…they are world class footballers. I am genuinely delighted to have the chance to train and play alongside them.
“Honestly, I cannot wait to wear the City shirt again.”
City’s Director of Football Txiki Begiristain added: “Ilkay is one of the finest professionals I have ever worked with. His dedication to football and his approach to every single training session is something special.
“He is also an exceptional midfielder. His reading of the game, his football intelligence, his technical quality and his leadership make him an excellent addition to our squad.
“To be able to bring him back here is fantastic news for everyone. He will help us in our main objective, which is to win trophies, but he will also be an inspiration to so many.”