The Avalanche's General Manager Greg Sherman told the club's official website that he was delighted to have Forsberg back in the fold.
"We're proud to announce that Peter will be back in an Avalanche sweater, Peter believes he can compete at the NHL level based on how his workouts went. He will provide additional leadership to our club and he will have an impact with this young team."
Forsberg said that he was confident that he was now in top physical shape.
"After testing my abilities with NHL players over the last few weeks, I feel confident that I can play at the NHL level and help this team," said Forsberg. "I wanted to see where I was at physically and I am ready for this new challenge."
The Swede captured the 2003 Hart Trophy as the NHL's Most Valuable Player after leading the league with 106 points in 75 games that year.