Pietersen will play a full season in the lucrative Indian Premier League - the auction for players is held on Wednesday and Thursday - before joining up with Surrey in May, once his team's IPL involvement ends.
Pietersen, who has ruled himself out of competing in the Caribbean Premier League to commit to Surrey, will primarily be involved in Twenty20 matches on Friday nights between May and July.
Surrey director of cricket Alec Stewart said he was delighted to have re-signed the batsman, while remaining within the ECB's £2m salary cap for all playing staff.
"I don't want anyone thinking we've gone and spent millions on one player," said Stewart. "There is a budget that I have to stick to and we've done that, so that's great.
"He's playing for the right reasons, in that he wanted to play for Surrey, and he made that very, very clear.
"We've got a great player, a world-class player, and this is not just great for Surrey but great for the domestic game as well.
"It will give the Twenty20 Blast a great lift-off, and if he plays in the other forms of the game then it adds to the profile of our four-day and 50-over cricket."
Team-mates & experts on Kevin Pietersen
joined Surrey from Hampshire
for the start of the 2011 season after a loan spell the previous summer, saying he wanted to play for a London team because he lives in the capital.
In December 2011, the former Nottinghamshire right-hander
signed a new deal with Surrey
that was due to run until the end of his England career, and which ceased once his ECB central contract was terminated.
But Surrey, one of the wealthiest clubs in the country, were in a position to negotiate with Pietersen once he effectively became free agent.
Pietersen added: "I'm absolutely delighted to have agreed terms with Surrey and am thoroughly looking forward to playing my cricket for the club this summer.
"I've had some of my best moments in cricket at the Kia Oval and I'm really excited at the prospect of getting back out there playing in what will hopefully be a brilliant summer for us all at Surrey."
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