Skinstad, who last played Test rugby in 2003 and has been living in England since, will arrive in Durban on Thursday to join the Super 14 side for pre-season training.
And his signing has delighted Sharks coach Dick Muir.
"It is absolutely fantastic news," Muir told superrugby.co.za. "He is a great asset, a wonderful chap, a born leader and a unique athlete. He will be a real asset to the Sharks.
"He has been playing in England and the conditioning reports we have received have all been positive. He will have a medical here but I have no doubt he is fit.
"I know that he is raring to go. He wants desperately to play for the Sharks and he wants to go to the World Cup."
Skinstad, who grew up outside Durban, played alongside Muir for Western Province but dismissed talk that he would simply walk into the side.
"Not for one moment do I believe that making the Sharks Super 14 team will be a cakewalk," said Skinstad.
"If I'm to run on to the park, I will have to really work hard to oust the incumbent Sharks players. But I'm determined to make an impact as a team player.
"I always said I would eventually come back to the Sharks but for a while I thought it might not happen. Now the stars have aligned and I am motivated, enthusiastic and thankful for the opportunity."
Skinstad's parents live in Westville and the talented loose forward will settle in Durban with his wife and baby daughter.
"I have taken a major decision to leave the day-to-day running of Esportif (his own sports management company in London) while I pursue my dream," he added.
"I have the total support of my family and business partners and I look forward to the challenges."