Toure ended his eight-year stay with the Citizens last season after his contract expired.
The 35-year-old has now penned a deal with Olympiacos, where he spent the 2005-2006 season.
“It is an honour to be back at Olympiacos! When I left in 2006 I said I would come back and I am delighted to keep my word. I had offers from lots of clubs across Europe, Asia and the USA. Ultimately, I made my decision based on the special relationship I have with this incredible club," Toure said on his official website.
“I am as hungry for success now as I was when I first arrived here many years ago and I cannot wait to help the club win the trophies the great fans of Olympiacos deserve.
“It is now time to let my football do the talking once again. Let’s do this!”