The 39-year-old, who left four years ago after a five-year spell at Molineux, has now arrived on a free transfer and signed a deal until the end of the season.
He was first choice under Nuno Espirito Santo as Wolves won the Championship in 2017/18 but then lost his place when they were promoted to the Premier League.
Executive chairman Nathan Shi said: “In John, we feel like we’ve signed not only an experienced goalkeeper, but also someone who will be a strong personality off the pitch. He has won the Championship with the club previously and the experiences he can share with the group will be invaluable.
“It’s important for Cesar to have goalkeepers who push each other and drive standards, and John is the right character to fit back into the club seamlessly, having been such a big presence during his first spell, so we’re delighted to have him back.”
Head coach Cesar Peixoto said: “It’s important having a lot of experience in the team, and John knows the club very well, he’s home at the club, so will be an important guy on the pitch, but also in the dressing room. He is a player who played a lot of games, who got to the Premier League with Wolves and who has a lot of knowledge of the Championship and English football.
“It’s important to bring new faces, new personalities, but it’s also important to build a strong group, a strong spirit, and I think he can add this quality, and we want to bring these characteristics to the club.
“It’s a long season and our goalkeepers have to work all together to stay at a high level. It’s important they have a good environment between them because all of them are here for the team, for the club.”
After leaving Wolves, Ruddy moved on to Birmingham City before spending the last two seasons at Newcastle United.
Technical director Matt Jackson said: “John will be a massive addition for us. It’s rare that a signing can affect all areas of a football club, but it really feels like he can do. We know exactly what we’re getting, both as a man, and as a footballer, and we think that he has the attributes to really help the goalkeeping group from a technical perspective.
“He will guide the squad an awful lot and can concentrate on that side of his game without us having to teach him the fundamentals of goalkeeping. His qualities will be crucial, but that’s not to say that he’s not also still a very, very good goalkeeper.
“We like the core of the group. We like how they’re getting on now, and I think in these early games they’ve demonstrated a togetherness that’s been excellent. We like the group’s spirit, and they’ve been really diligent in taking on the ideals and the disciplines from the coaching group, and John’s going to be a really valuable asset for that too.”