United lost the 37-year-old midfielder at the end of last season when he quit football after 676 appearances for United over 17 years.
But Scholes, who remained on United's staff as a coach, told manager Sir Alex Ferguson that he wanted to reverse his retirement decision.
The move came with United losing two consecutive matches and are three points behind City in the Premier League title race.
"I've been pretty clear since I stopped playing that I miss it," Scholes said ahead of United's cup match at City. "I'm delighted the manager feels I can still make a contribution to the team and I'm looking forward to playing my part in trying to bring more success to this great club."
Scholes won 10 Premier League titles - most recently in May - with United and scored 150 goals. His last appearance for the northwest club was as a late substitute in the 3-1 defeat by Barcelona in the Champions League final at Wembley Stadium in May.
"It's fantastic that Paul has made this decision," Ferguson said. "It's always sad to see great players end their careers, but especially so when they do it early. But he has kept himself in great shape and I always felt that he had another season in him. It's terrific to have him back."