Clarke, 31, spent a highly-successful three-year spell with the Bantams between 2014-17. His arrival follows on from the addition of Derby loan midfielder Jacob Butterfield.
On his Valley Parade return, Clarke said: “The minute the club got in touch and showed interest, I was trying to push it as much as possible and am delighted to be back.
“It means a great deal to come back to a club where I made so many fond memories.
“Every season I was here we progressed and I am over the moon to be a Bradford player again.
“I definitely think I can offer experience and quality. I am excited to get stuck in and see what the next few weeks and months bring.
“The supporters will know, from my previous seasons at the club, every time I go out on the pitch I give 100 per cent - and nothing less. I am right up for the fight.
“I have really missed it. My family still live up here and every time I drive past the stadium, I miss the feeling I used to get when you run out on the field.”
On his signing, Bantams boss David Hopkin added: “We are delighted to have Billy on board, it is great to have him back at the club.
“He will bring another dimension to our attack and force greater competition for places.”