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The position will be the 39-year-old's third managerial post after spells with Portsmouth and Weymouth.
"I'm thrilled to be given the opportunity to manage Millwall," Claridge told the club website. "I thoroughly enjoyed my time here previously and this is a challenge I just couldn't turn down. Everyone at Millwall knows me and knows what to expect. I'm now looking forward to getting started."
Chairman Jeff Burnige, who also held talks with former Derby County boss George Burly, was pleased that he has finally found the right man.
"I am delighted with the appointment," commented Burnige. "Steve Claridge fulfils the criteria I was looking for in a manager and indeed he is the only candidate to whom I offered the job.
"He has previous managerial experience and a wide knowledge of this Division. The clinching factor for me, however, was that he is the person with the burning desire to manage Millwall. Steve has a passion for this club that the supporters can identify with.
"He was a firm favourite here during his spell as a player between 2001 and 2003, and was an inspirational figure on the field. I am looking forward to him providing the same inspiration in his new role as manager."