The 26-year-old ended a frustrating, injury plagued 14 months at Easter Road in late August when he agreed to the early termination of his contract.
Though the winger is still recuperating from his latest setback, Queens moved to recapture the former fans favourite, who was in attendance to watch his old club defeat Linfield in the Irn-Bru Cup on Sunday.
Carmichael spent five years at Palmerston Park, where he made over 150 league appearances and was named in the League One Team of the Year when Queens won promotion back to the second tier in 2013.
He moved to Easter Road in the summer of 2015 on a free contract, but saw his opportunities limited by injury and competition for places. He made only nine total appearances.
Carmichael will now be looking to dent the promotion ambitions of Neil Lennon’s men, as he joins a Queens side ahead of Hibs in the Ladbrokes Championship table.
Commenting on his return, Carmichael said: “It’s great to be back at Palmerston, Queens have always been special to me. I’ve struggled with injury since I left but I’m looking forward to being involved again. The team have been great so far this season so long may that continue.”