Alves has signed a contract with the Brazilian giants until December 2022, it was announced on Thursday.
The 36-year-old – who first moved to Europe in 2002, joining Sevilla from Bahia – was a free agent following his PSG departure after two years with the Ligue 1 champions.
Alves had been linked to former club Barcelona and the Premier League, however, the veteran has opted to return home to Brazil as he eyes the 2022 World Cup in Qatar.
“Daniel Alves is the embodiment of what this management envisions for Sao Paulo – one of the leading players in the world and recognised for his immense professionalism, his fierce determination and his endless thirst for titles and victories,” club president Carlos Augusto de Barros e Silva said in a statement.
“He is also a socially engaged citizen and passionate about our country. Sao Paulo, therefore, wins on every possible front.
“One day I told Daniel that he would come to play at Sao Paulo, the club of his heart. Today I have the immense joy and pride to have kept that promise.”
Alves captained Brazil to Copa America glory on home soil in July – taking his career haul to 40 trophies.
The veteran’s transfer was announced in a video on Sao Paulo’s Twitter account, with the defender expressing his excitement to be back in his native country playing for the club he supported as a child.
“I could’ve picked any other team to play for,” Alves said. “But I chose to come back to Brazil, to my country, to my people. To the club I love.
“It’s unreal, but I’m here!”