The 29-year-old, who left Well to move to Everton in a £1.25million move back in 2003, sensationally agreed to return last night after being released by Sunderland.
The Scotland international, who has been training with Stuart McCall's squad over the last week or so, watched on from the stand during the Steelmen's 3-0 triumph over SPL rivals Inverness Caley Thistle on Saturday.
Despite the Well boss attempting to calm rising expectations that the cult hero was set for a return, it was announced last night that he will wear the No.20 shirt after penning a deal to put him in claret and amber until the end of the season.
And with Motherwell set to take on Dundee United at Fir Park tonight, McFadden is in line to be in the squad to face Jackie McNamara's men.
Speaking to MFC TV, he said: "I am really pleased to be back here at Motherwell.
"I need to get back playing competitive first-team football and this is the best place for me.
"The team are flying high near the top of the table, but I hope I can add something to that over the next few months."
McCall added: "I said yesterday that I wouldn't speak to James until after the Dundee United match and that was absolutely the plan.
"However, James actually came and spoke to me about 3pm and we sat down and discussed football.
"Things have snowballed in recent days and there has been a lot of speculation.
"We never talked finances; that would take place between the club, James and his representatives.
"He just wants to play football, which is obviously great, but we have been going well and the lads currently in the squad have performed brilliantly to get us to second in the table as it stands.
"He understands that, and knows he will have to win his place in the side.
"He is itching to get going. There is no doubting his talents as a player; he has had a fantastic career.
"He doesn't need to impress us, we know his ability. He is fit in training but proper sharpness will only come with matches, but his first job is winning a spot in the starting team.
"We always try and operate on merit and the ideal situation for everyone is he will come in, impress, do well, kick on and the deal will suit both parties.
"I am sure fans will be desperate to see him on the pitch. I'll probably start getting shouts after 20 minutes in tonight's match, but obviously I will deal with that and have no worries with that.
"But it's an exciting time. We're getting a player who is really hungry and determined to do well for both Motherwell and himself."
Well wing king Chris Humphrey said: "You can tell the level he has played at straight away in training. His touch and his awareness and his ability are plain for everyone to see."