Just seven weeks ago the spinner was being fined by police for urinating on a doorman during a drunken night out in Brighton, an incident which saw the 31-year-old get sacked by Sussex.
But Panesar impressed for his new club Essex during the remainder of the summer, and has been made part of the squad aiming to become the first Englishmen since the nineteenth century to win a fourth consecutive Ashes series.
Alongside Panesar are newcomers Gary Ballance, Ben Stokes and Boyd Rankin.
The trio of newcomers have played one day cricket for England before but this will be their first senior tour.
Michael Carberry was also recalled and will hope to add to his sole England Test cap, earned four years ago in Bangladesh.
There was, however, no room in the squad for Nick Compton, Graham Onions or Tim Bresnan.
Onions, whose 66 wickets at an average of 18 guided Durham to the County Championship, voiced his disappointment at the ECB's decision in a series of tweets.
All-rounder Bresnan, still recovering from a stress fracture of his lower back, is to travel to Australia and the England coaches will monitor his fitness progress.
National selector, Geoff Miller, said: “We are fully aware that the Ashes series will once again be fiercely contested and that this squad will need to work extremely hard and play to a very high level to retain the Ashes and we believe we have selected a squad capable of doing just that.
"As we have seen in previous series we will need all members of the squad ready to step up and make vital contributions throughout the five Tests and we feel that all 17 players have the ability to do that.
"There is real competition for places with both bat and ball and we feel that we have provided Andy Flower and Alastair Cook with a well balanced squad."
England Ashes squad:
Alastair Cook (captain), Joe Root, Jonathan Trott, Kevin Pietersen, Ian Bell, Matt Prior, Stuart Broad, Graeme Swann, James Anderson, Jonny Bairstow, Monty Panesar, Gary Ballance, Michael Carberry, Boyd Rankin, Steven Finn, Ben Stokes, Chris Tremlett.