After his contract with the Ligue 1 club ended in June, sources told Reuters that he snubbed a lucrative offer from Saudi Arabia's Al Ittihad and agreed a one-year deal with the Spanish side.
"Sergio arrived at our youth academy at the age of seven and progressed through the youth ranks until he made his debut in the first reserve team at the age of 16 in the 2002/03 season.
"Our academy's centre-back... returns home almost two decades after leaving at the age of 19 for Real Madrid," Sevilla said in a statement.
The defender moved to PSG on a free transfer in 2021 after failing to reach an agreement to extend his 16-year stay at Real Madrid. He won two Ligue 1 titles during his two seasons with the French club.
At Real he won four Champions Leagues and five LaLiga trophies, playing a total of 671 games and scoring 101 goals.
Spain's most capped international player also won the World Cup in 2010 and two European Cups before announcing his international retirement in February.