The Australia international - at home in central defence or as a central midfielder - has re-joined the club he spent time at on loan during the 2011-12 A-League campaign
The fringe Australia international impressed while on loan from J2-League outfit JEF United for the latter half of the 2011-12 A-League season, and completes Victory's squad for the coming campaign.
The 26-year-old had featured nine times in the league for JEF in the 2012 season, but has been allowed to return to Melbourne to bolster Victory's defensive options.
"Mark is an uncompromising player who provides great versatility to the playing group, as he is equally comfortable in defence as he is in central midfield," Victory coach Ange Postecoglou said via statement.
"He left a real impression on the group during his time at the club last season and from that perspective we’re delighted to have him back in a Victory shirt."
Milligan began his A-League career with Sydney FC, moving to the Newcastle Jets before joining Chinese Super League club Shanghai Shenhua for the 2009 season. He joined JEF in 2010, making 53 league appearances for the club before his departure.
"Last season, while the club didn't quite have the success they had hoped for, I really enjoyed my time in Melbourne and I'm excited to be coming back," said Milligan, who will train with Victory on Thursday.
"Ange [Postecoglou] has made a few really good signings, so I think there's a lot to look forward to next season and hopefully, as a group, we can bring plenty of success back to Melbourne Victory."