The Dragons, backed by film and TV stars Ryan Reynolds and Rob McElhenney, have added the 39-year-old to their ranks due to a goalkeeping injury crisis.
Foster, No.1 at The Hawthorns for seven Premier League campaigns before his 2018 exit, had announced his retirement after departing Watford last summer.
But the former England and Manchester United shot-stopper is out of retirement ahead of his 40th birthday next month for a second spell at The Racecourse Ground.
He enjoyed a spell on loan in Wales in 2005 where Foster helped the League One outfit to the Football League Trophy at the Millennium Stadium.
Foster went on to make 223 appearances in all for the Baggies. He was signed by Roy Hodgson, initially on loan, and left at the end of his contract a few months into Darren Moore's tenure.
Phil Parkinson's side are edging a thrilling title race with Notts County in the fifth tier. Wrexham, looking to return to the Football League after 15 years away, currently lead the way by three points, with a game in hand.
Though the Dragons did suffer a significant blow in losing No.1 Rob Lainton to a season-ending injury over the weekend.
Foster said: “I’m over the moon. I’ve been at the Club an hour this morning and it seems a really nice place. Everyone is down to earth and the manager’s top class.
“It’s changed a lot since I was last here, but it’s nice to be back and it’s nice to be back as a player too. It will be interesting to see how my body feels after training today! I’m looking forward to getting started.
“The first time I was here, it was genuinely the springboard to the rest of my career – on the back of the loan move, playing in the LDV Vans Trophy Final at the Millennium Stadium, I got my move to Manchester United at the start of the next season. It was absolutely bonkers!
“If you’d told me 18 years ago that I’d have gone on to have the career that I have had, I probably wouldn’t have believed you to be honest so I do owe a lot to Wrexham.”
Foster was back at The Hawthorns earlier this season where he played in goal during the Brunty v Mozza charity match during September's international break. He has been heavily involved in media duties in the latter stages of his career and since retirement. He runs a hugely popular Youtube channel 'The Cycling GK' as well as a podcast 'Fozcast'.