The 30-year-old will return to the club which he served with distinction for five years before moving to London rivals Tottenham in acrimonious circumstances in August 2012
The 30-year-old has returned to England from Seattle Sounders in order to help the Cottagers' bid to avoid relegation during the MLS off-season.
Dempsey left Fulham in acrimonious circumstances to sign for Tottenham in August 2012, ending a five-year stay at Craven Cottage having left New England Revolution in 2007.
"It feels good to be back," the USA international told the club's official website. "This has always felt like my home in Europe and I'm just excited to be back and be a part of this team and play in this league.
"I wanted to get back to playing at the highest level and back to top form.
"The game plan is to go out and give everything I have, make the most of it and take some shots.
"The evidence is there, the signs are there that it’s a team fighting for any points they can get and if they keep that mentality there shouldn’t be any problem climbing the table.
"They’ve been in tough sit before and come out, and I don’t think this will be any different."
Dempsey scored 60 goals in 225 appearances for Fulham, including a famous individual goal against Juventus during the club's miraculous run to the Europa League final in 2010.
He follows in the footsteps of the likes of Landon Donovan and Thierry Henry as MLS stars to have enjoyed loan spells in the Premier League.