The 65-year-old left his post as Brazil boss following the World Cup this summer, in which the host nation were hammered 7-1 in the semi-finals by Germany before losing the third-place playoff 3-0 to Netherlands.
Scolari has endured a difficult month after the Selecao's capitulation but could barely contain his delight at returning to the club with whom he won six titles in three years in the 1990s.
"I've been here twice before and always had a marvellous relationship," Scolari told a press conference at his unveiling at the Porto Alegre club. "I came back at this moment because I need a hug, some affection, people who know me and Gremio is the right place, because I know that the players and the supporters will be with me.
"Everyone knows that I'm a Gremio fan. The only invitation that I would accept is from Gremio.
"I'm at home and happy to be at Gremio again. There's nothing better than being here today. I am one of the pieces, but only one. Everyone has to work towards our goals now."
Scolari, who was greeted by close to 100,000 supporters at the airport prior to his arrival at the club, acknowledges he will forever be associated with the Germany result but maintains his earlier triumphs with Brazil - including winning the 2002 World Cup and 2013 Confederations Cup - should not be forgotten.
"If you ask me what I'm marked by, what I'll never forget, it's the 7-1. I know that. But the overall results do not allow people to speak badly about everything I did," he added.
"I'm the same person. Felipao had a difficult game and after that came to be reviled by 90 per cent of people. Not the general public, not fans, but mainly people linked to football through the press."