O'Connor was training with Celtic after being released by Barnsley
Colin Calderwood is surprised at being able to bring Garry O'Connor back to Hibernian but aims to sign another striker before the new season.
The Hibs boss also confirmed the departure of Ricardo Vaz Te and Jakub Divis at the end of their contracts.
But Scotland forward O'Connor this month agreed to his Easter Road return after being released by Barnsley.
"I think it is a terrific signing," said Calderwood. "It is one that I thought we'd not be able to complete."
O'Connor began his career with Hibs, winning the first of his 16 Scotland caps while in Edinburgh before moving to Lokomotiv Moscow for about £1.6m in 2006.
The Russian club sold him to Birmingham City for £2.7m a year later, but fitness and injury problems plagued his four-year spell at St Andrews.
And, after a spell at Barnsley on loan initially to regain match sharpness, he moved on to the Championship outfit permanently in December but had his contract cancelled in April after scoring only once in 13 appearances.
“You can see he's got a real desire to get out playing again on a regular basis”
Yet Calderwood, who believes that O'Connor will recapture his form in the Scottish Premier League, thought the 28-year-old was a player who might be outside the reach of Hibs.
"But, during the summer, it progressed - I met with him - and I'm really excited about what he is going to offer us," said the Hibs boss.
"He is coming back home. The fact he has formerly been at the club was a big help in enabling us to recapture him.
"He gives us a focal point up front. I think he is a character that the fans need no introduction to.
"He has lifted me on the occasions when I've met with him. You can see he's got a real desire to get out playing again on a regular basis."
Despite O'Connor's arrival and the retention of Akpo Sodje, Calderwood is still looking to bring in more options up front having already secured former Bristol City winger Ivan Sproule and ex-MK Dons defender Sean O'Hanlon.
Vaz Te made 10 apperances for Hibs after being released by Panionios
"We will be looking in that area," he said. "It is the one part of the team where we're short - we've almost got more goalkeepers than strikers.
"We've started with a real big signing for lots of reasons. What we add will be focused on complementing Akpo and Garry up front."
Calderwood had announced in April a raft of players he was releasing at the end of the season, but no mention was made at the time of former Bolton Wanderers forward Vaz Te, who signed in February, and goalkeeper Divis, who arrived from Tatran Presov the previous month.
"We had an option with Jakub and we didn't take that up," added Hibs' manager.
"Ricardo's deal was until the end of the season.
"He was able to come and help us during the latter stages of the season.
"When it came to the end, we knew we would shake hands and walk away."