Millwall manager Neil Harris confirmed that the 38-year-old is not quite up to scratch in terms of fitness but should be there in a couple of weeks.
The Australian legend earned his professional debut with the Lions and went on to score 56 goals in 249 appearances, reaching the FA Cup final in 2004 only to lose out to Manchester United.
The 38-year-old has been looking for a club most of the January window, having left Melbourne City last month.
After being linked with various clubs around Europe, the Socceroos star will be delighted to have signed for his former team, as he looks to put his hand up for selection to the Australia squad for Russia 2018.
Speaking to the Millwall website, manager Neil Harris, who played alongside Cahill during his first stint in South London, expressed his delight over the capture and spoke very highly of his new signing.
"I'm naturally really pleased," said Harris, "First and foremost, Tim comes with a wealth of experience. Not just in the footballing world, but for this football club. It might have been just over 13 years since he left, but this place doesn't change.
"The players will thrive off the enthusiasm that he brings. When I played with him, I appreciated what he did. Since then, I've followed his career and admired what he has done and I know full well what he can bring to my dressing room.
"He is a different player to what he was years ago - he plays a little higher up the park now. At 38, he is in terrific shape."
However, the Lions boss conceded that his veteran forward will not be up to scratch in terms of match fitness for a couple of weeks, due to the lack of proper training during his quest to find a new club.
"He’s not going to be fit for a couple of weeks. He’s not done a lot in the last seven weeks since leaving Oz, so we’re going to have to be patient with him," Harris explained, as reported by The Guardian.
Millwall are currently 14th in the Championship with 35 points from 29 matches and plenty still to play for, starting against Reading this weekend.
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