Hill established himself as the most successful manager in Dale's history before parting ways to take over at Championship club Barnsley in the summer of 2011.
Rochdale subsequently appointed Steve Eyre as Hill's direct replacement before then turning to John Coleman 12 months ago.
But Coleman was sacked on Monday of this week, along with assistant Jimmy Bell, with Dale 14th in npower League Two following their relegation from the third tier last season.
And with Hill having also been relieved of his duties by Barnsley last month, it is once again a case of as you were at Spotland - until May 31 at least.
"When the club approached me about coming back to Spotland I didn't hesitate," Hill told Rochdale's official website. "Rochdale Football Club will, and always will remain dear to me, and to be honest it was a no-brainer.
"I'll be here until the end of the season and we will take stock of the situation then. Until then we have an 18-game season to think about, to plan and to achieve so that's what I, the players and staff will be doing.
"We also need the fans to get behind us and give us all your support, that is crucial if we are going to go forward. I'm delighted to be back and cannot wait to get started."
Hill first became manager at Spotland in 2007 and guided them to their first appearance at Wembley, via the League Two play-offs, before eventually taking them up to League One automatically in 2010, securing their first promotion in 41 years, and duly keeping them there.
Dale chairman Chris Dunphy added: "This is not a position we, as a club, would liked to have found ourselves in, but after a recent run of poor form it was important that we acted now. I am delighted that Keith has decided to take the job and I am confident in his experience and his ability to work and develop our current squad."