Slaven Bilic was hopeful of completing three transfers before Tuesday's 1800BST deadline, with the midielder's return the first to be ticked off the list.
Song impressed initally at Upton Park last season before his form fell off towards the end of the campaign, with co-chairman David Sullivan admitting a permanent move would be a gamble for the club.
But the 27-year-old had his loan return to West Ham confirmed by David Gold earlier on Tuesday, with Sullivan's son, Jack, claiming on Monday evening that the club retain the option to extend by a further year.
"I am very happy," Song told the club's official website. "For me it was very important to come back because when I was here I had a great rapport with the fans and the Club.
"It was a very easy choice for me to come back. When I left I didn't know I would come back here. It was not easy but at the end of the day, the most important thing is I'm here now and I'm very happy.
"I feel at home, everything feels at home, for my family too, they're set up very well here. My kids are playing for West Ham academy. It's a pleasure and it's like I never left here.
"This is a new year, new players have come in and we have the new manager. Everything is changing but the way that the Club wants to be [...] and we have to finish better than we did last year."
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