The versatile 34-year-old left the Sydney-based club in 2015 to sign for Top 14 side Bordeaux-Begles before spending a spell in Japan with Kobe Steelers.
Ashley-Cooper, who made his first Wallabies appearance for over two years against Italy last November, on Tuesday sealed a return to the Waratahs for the 2019 Super Rugby season.
"My desire to continue to play top-tier rugby and further my development is as strong as ever. The Waratahs presented this opportunity to me and I jumped at the chance to reunite with the sky blue jersey," Ashley-Cooper said.
"The challenge I have ahead of me is not being taken lightly. I will put everything into this 2019 Waratahs season to see the team build toward something special.
"Overall, I'm super excited to get back into the Waratahs organisation again and contribute in every way I can. I've had so many amazing memories in the sky blue jersey and I'm looking forward to creating more with this team."
Waratahs coach Daryl Gibson said: "Adam's record speaks for itself and you cannot replace the international experience that he brings to the team. He is an incredibly talented player and a highly respected leader, and I have no doubt that the younger players in the team will benefit from having him in our environment,
"His contracting supports our plan around managing our players better in 2019 and further creating depth in our squad.
"At the same time, I take my hat off to Adam because he has accepted a base contract as his return is about chasing a dream of playing Super Rugby for the Waratahs again and earning a spot in the Wallabies' Rugby World Cup squad."