The midfielder arrived on loan from Borussia Dortmund ahead of the 2017-18 campaign, before the Magpies exercised a clause to make the move permanent on a five-year deal in October.
However, Merino found Premier League starts hard to come by in the second half of the campaign and just 14 of his 24 top-flight appearances were as part of the starting XI.
The 22-year-old now returns to Spain with Sociedad, a club based just over 50 miles from his home town of Pamplona, with reports suggesting he had a £10million (€12m/$13.2m) release clause in his contract.
"I'm very happy and feel joy. I love this club, it is very close to Osasuna. I have been a fan since I was little," Merino, who has signed a deal until 2023, told Sociedad's official website.
"I am delighted to be here and I can't wait to work with the ball."