The 30-year-old returns to the club he left four years ago, having scored 128 goals in his first stint at Ibrox between 2006 and 2010.
"I'm thrilled to be back, I'm a Rangers fan and I know everything about the club," Boyd told the Rangers website.
"As soon as I knew there was a bit of interest in me from Rangers, there was only one place I was going."
His time away from Rangers has been eventful to say the least. He moved from Rangers to Middlesborough in 2010 and was expected to score the goals that would take the club back into the Premier League but he endured a miserable campaign on Tyneside, bagging a mere six goals.
He ended the 2010-11 season on loan at Nottingham Forest before sealing a permanent move to Eskişehirspor in Turkey. However, Boyd terminated his contract in December 2011 and started legal proceedings against Eskişehirspor claiming he had never been paid during his stay at the club.
This led to a move to the MLS and the Portland Timbers before returning to Scotland with Kilmarnock at the beginning of last season and going on to score 22 league goals.
Rangers manager Ally McCoist said it's "great news" for the club that Boyd has decided to return.
"He obviously showed a great desire to come back and we were very keen for him to come back," said McCoist.
Boyd is joined by former Rangers striker Kenny Miller who has also returned as the club prepare for life in the Championship.