The 29-year-old Frenchman, who made 153 appearances for Arsenal from 2004 to 2008, rejoins the Club after five years in Serie A with AC Milan.
A tenacious and combative midfielder, Flamini was an integral part of the Arsenal team which reached the Champions League final in 2006 and also helped the Club win the FA Cup in 2005.
During the run to the Paris final in 2006, Flamini showed his versatility by playing as a left back for much of the campaign, becoming part of an Arsenal defence that racked up a record 10 consecutive clean sheets in the Champions League.
During his time in Milan, Flamini made 122 overall appearances for the Rossoneri, winning a Serie A title and the Supercoppa Italiana in 2011. He featured a total of 22 times for AC Milan last term.
Having come to the end of his contract with AC Milan at the end of last season, Flamini had been maintaining his fitness at London Colney this summer.
"We’re very pleased Mathieu has agreed to re-join us," Arsène Wenger said. "He is a player of real quality, with a fantastic work rate and great mentality.
As we know, Mathieu is a strong midfielder, but is also is comfortable playing in defence too. He is a very good addition to our squad." Mathieu will wear the number 20 shirt at Arsenal.
This is Arsenal's second signing of the season after Yaya Sanogo, and for the second time it's a FREE transfer.