The 29-year-old right-back left the Riverside Stadium to join Birmingham in 2007, having been a part of the Boro set-up since the age of nine.
He told the npower Championship club's official website: "It's great to be back. I couldn't be happier.
"I went to Ayresome Park and followed them at the Riverside, so there's only really been four years out of my footballing life where I haven't been a part of the club."
Parnaby's four-year spell with the Blues ended when his contract expired in 2011 and the Durham-born defender is grateful to have been offered a route back into football after a year out of the game.
He added: "I have had a mental kick up the backside. I've never been more positive and ready to go that extra mile for Middlesbrough."