The 25-year old midfielder returns to CenturyLink Field after spending the 2011 season with the Sounders prior to being shipped off to Montreal along with Mike Fucito with Eddie Johnson heading to Seattle.
"We are very excited about bringing Lamar back to Seattle," said Sporting Director Chris Henderson.
"He is an attacking midfielder who plays smart and adds versatility to our club. Lamar scored a few key goals for us in the past while being a very consistent player. He is a great teammate and positive presence in the locker room."
Neagle, who initially joined Seattle in March 2011, added: "It's amazing to come home and rejoin the Sounders. The fans have had so much support for me throughout my career and Sigi (Schmid) was the first coach to give me a chance. It'll be fun for me to connect back with the guys and get to work. I'm looking forward to having a strong season."