Penny made his debut for his home-town club in 2007 and, after scoring 13 tries in his first 12 appearances, went on to be named in the Super League Dream Team that year.
However, after suffering a loss of form, he went on to have spells at Widnes, Harlequins and Wakefield before joining Championship part-timers Swinton two years ago.
Now 25, Penny has been given a 12-month deal to return to the Halliwell Jones Stadium for the 2014 season, with a two-year option, and he has pledged to make the most of his second chance.
"It's not fully sunk in yet," he said. "I am made up to be coming back into the full-time environment after a couple of years working in a normal job as well.
"It won't be like going to a new club where you need to settle into the surroundings and facilities as I know a lot already so it will be easier for me and I'm looking forward to it.
"Since I last played at Warrington I've learnt a lot about rugby and life itself which will benefit me a lot more this time around."
Wolves head of coaching and rugby Tony Smith said: "We are delighted to give Kevin another opportunity.
"He's gone away, had to go back a level or two to learn some more about rugby league and we think it's terrific that he's got another chance to come back here and show what he's learnt.
"We've been monitoring him for the last couple of years and watched his progress at Swinton. He's turned into a terrific player."