The Royals generated some spending money by selling midfielder Gylfi Sigurdsson to Hoffenheim, some of that money has gone to keeping the Georgia international for a full season loan.
The 28-year-old had a successful loan spell with the Royals last season and had no hesitation over going back.
Manager Brian McDermott said: "We're really pleased to have him back, he was a real favourite with our fans, we know exactly what we're getting and it's a really positive addition to our squad."