Sadler was released by Rotherham after featuring just once for the Championship club since signing from Crawley at the start of the season.
The 30-year-old made 53 appearances for Shrewsbury during a loan spell at the club from Watford during the 2010/11 campaign.
"It's really good to be back," he told the club's website.
"I want a promotion with Shrewsbury and what better place to do it than from League One up to the Championship.
"I've played a lot of games in this league and that is definitely one of the remits for the manager this summer - to bring in a few lads who have got experience of the division.
"Knowing the division as I do, I'm sure that we have nothing to fear at all."
Promoted Shrewsbury Town have signed defender Mat Sadler on a two-year contract.