The 39-year-old joins the Black Cats on an “initial contract” until the end of the season following his Ibrox exit last month.
Defoe and Rangers reached a decision to part ways amicably.
The former England striker had been part of the management team under Steven Gerrard as well as still having a playing role. That changed following the arrival of Giovanni van Bronckhorst.
Defoe, who is in the top ten highest scorers in Premier League history, played his role in helping Rangers win last season’s league title.
Speaking following his exit, he revealed he had already had a number of calls and that he wanted to continue playing.
The striker will be aiming to help the club win promotion from English League One where they currently sit third.
“I can’t stop smiling because this is a special move for me for many reasons,” Defoe told the Sunderland website.
"I’ve had so many messages saying, ‘remember when you said you would come back’, as I said that I would one day and when I left, I wasn’t ready to leave. I have a special bond with the fans here and the club is in a fantastic position to get promoted.
"I want to be a part of more special times here and I’m looking forward to it.”