Mourinho coached Chelsea between 2004 and 2007, before being fired and going to Inter Milan, and then to Real Madrid.
“I am delighted to welcome José back to Chelsea. His continued success, drive and ambition made him the outstanding candidate,” said Chelsea chief executive Ron Gourlay.
“It is our aim to keep the club moving forward to achieve greater success in the future and José is our No1 choice as we believe he is the right manager to do just that. He was and remains a hugely popular figure at the club and everyone here looks forward to working with him again.”
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Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.
Newcastle United are staring down the barrel of relegation to the Championship for the second time in the past eight years.