The German was dropped by the team in 2011 after four years with the squad.
He has a conviction for grievous bodily harm following a nightclub brawl in Shanghai after the 2011 Chinese Grand Prix.
Sutil's 18-month jail sentence was suspended and he was also fined 200,000 euros for the incident that left Eric Lux, then chief executive of Renault F1 (now Lotus) owners Genii Capital, needing stitches for a neck wound caused by a champagne glass.
“I’m delighted to be back in Formula One, especially with a team I know so well," said Sutil.
"I’m very happy and I want to thank Sahara Force India for giving me a second chance.
"Having been away from the sport, I’m even more determined to achieve my goals in Formula One."
The team gave both Sutil and Jules Bianchi - his rival for the seat - track time at the previous test in Barcelona last week.
"Things went really well at the Barcelona test last week and it almost feels as though I’ve never been away," he added.
"Driving the car felt so natural and I was able to get back in the groove quickly and find the limit. Now my focus is on making the most of the final test session this week, working with the team in the simulator and getting myself in the best possible shape for Melbourne.”
Team principal Vijay Mallya said: “The decision over our driver line-up has not been an easy one and we have given it great consideration over the last few months.
"It was a close call, but ultimately we felt that Adrian’s experience and historic links to the team gave him the edge, and will provide us with the best possible chance of realising our ambitions for the coming season.
"If he can rediscover the exceptional form he showed in the second half of 2011, I’m confident that we can pick up where we left off at the end of 2012.
"As for Jules Bianchi, he has impressed us enormously with his speed and work ethic, and I’m hopeful we can continue working with him this year to help him develop into a future Grand Prix driver.”
Sutil will further test the new car in Barcelona on Friday and Saturday, with Di Resta trying it out on Thursday and Sunday.