The 29-year-old travelled to London for a medical as the Blues confirmed the signing of left-back Marcos Alonso from Fiorentina for a reported £23m.
Luiz returns to Stamford Bridge on a three-year deal.
He first joined the Blues from Benfica for £21.3m in January 2011, and made 143 appearances before leaving to join PSG for a reported £40m in 2014.
Capped 56 times for his country, Luiz won the Champions League and FA Cup with Chelsea in 2012, as well as the Europa League a year later.
"We had a fantastic story during my first time at the club," said Luiz, who went on to lift two Ligue 1 titles with PSG.
Meanwhile, Alonso moves to the Premier League for the third time in his career.
The uncapped Spaniard, 25, played for Bolton 46 times from 2010 to 2013 before moving to Fiorentina, and had a four-month loan spell at Sunderland in 2014.
"It's time for me to win some titles," Alonso said on Chelsea's website. "It's a step up in my career."
Cesar Azpilicueta is the first-choice left-back at Chelsea, who have loaned Baba Rahman to Schalke this summer.
Meanwhile, a further 11 Chelsea players have departed the club on loan, bringing their total out of temporary deals to 38.
Among them is winger Juan Cuadrado, 28, who has rejoined Juventus on a three-year loan deal.
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Chelsea have re-signed Brazil defender David Luiz from Paris St-Germain for a fee of around £34m.