The former Republic of Ireland Under-21 international has agreed to join Trevor Croly's side on a permanent basis after spending last season on loan from Reading
The Dublin native spent the 2013 season on loan at the club from Reading and has opted to make his stay at Tallaght Stadium permanent after his contract with the English Championship side expired.
A former Republic of Ireland youth international, Sheppard is currently in his second spell with the Hoops having previously played for the club in 2011.
After helping Shamrock Rovers clinch the 2011 Airtricity Premier Division, the 22-year-old joined Reading in January 2012 but failed to make a breakthrough and was soon farmed out on loan to Accrington Stanley, where he made 12 appearances, scoring one goal.
Sheppard joins new signings Ryan Brennan, Luke Byrne, David O'Connor, Rob Cornwall, Conor Kenna and Simon Madden in committing to the club for 2014.