The 30-year-old began his career at Fir Park before moving to Everton in 2003, however after a decade south of the border the forward has sealed a permanent return to Scottish football.
After an unsuccessful spell at Sunderland, McFadden signed a short-term contract with Motherwell in February, and his performances impressed manager Stuart McCall enough to recruit him permanently.
The Scotland international helped Motherwell finish second in the Scottish Premier League last season, scoring five goals in his ten starts for the club.
He becomes McCall's seventh signing ahead of the new campaign, and admitted he was delighted to get his future finalised quickly.
“I am really pleased to have it all sorted," McFadden told the club's official website. "When the manager asked me to go to Spain (for a pre-season traning camp), I made up my mind then that I was going to come back and I am really looking forward to the season ahead.
“My relationship with the supporters and how they are with me certainly played a part in my decision.
“It’s familiar surroundings; obviously I really enjoyed it last season, I hope the fans will be happy and I am happy to get it all done.”
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