Di Matteo spent the best years of his playing career in west London before injury forced him to retire in early 2002 after scoring in two FA Cup and one League Cup finals.
The Italian enjoyed a relatively successful management career with MK Dons and West Bromwich Albion before being sacked by the Hawthorns club in February.
"I feel very excited to be back at my home club, it's fantastic,' Di Matteo told the official Chelsea website. "I spent a large part of my professional career and many years of my life at Chelsea.
"I had a great time here and made many friends, so it feels to me like my second home, or my home.
"I always hoped that one day I'd be able to come back, but you never know, nobody knows what the future holds, but I always thought it was in my destiny to come back to the club one day."
Source: Team Talk
Source: Team Talk