Several big-name Russian players have taken advantage of the work-stoppage in North America to move across the Atlantic and join the rival Kontinental Hockey League.
New Jersey Devils forward Ilya Kovalchuk signed a lucrative deal with big-spending SKA St Petersburg on Tuesday while three other players, including NHL MVP Evgeni Malkin, joined Metallurg Magnitogorsk at the weekend.
Colorado Avalanche goaltender Semyon Varlamov said he was returning to his former club Lokomotiv Yaroslavl, who have assembled a new team this year after their entire roster was killed in a plane crash that left 44 people dead last September.
Ovechkin, who celebrated his 27th birthday on Monday, has decided to rejoin Dynamo despite an even bigger offer from wealthy city neighbours CSKA, local media reported.
"I'm happy to be playing in my home town," the Washington Capitals left wing, who won back-to-back Hart Trophies as the NHL Most Valuable Player in 2008 and 2009, told local media.
"I'll be wearing my old 32 number, the same one I had when I was playing for Dynamo a few years ago," he said after taking part in a Dynamo training session on Wednesday.
He made his professional debut for Dynamo at aged 16 in 2001, helping them to the league title in 2004-05. After being selected first overall by the Capitals in the 2004 NHL Entry Draft, he moved to Washington the following year.
Ovechkin could make his KHL debut on Sunday when Dynamo host Kovalchuk's SKA at the Luzhniki ice arena.
After failing in his bid to land Ovechkin, CSKA general manager Sergei Fedorov moved quickly to sign his former team mate with the Detroit Red Wings, center Pavel Datsyuk, who has won three consecutive Frank Selke Trophies, awarded to the best defensive forward in the NHL.
CSKA, once considered the country's most glamorous team with 32 domestic titles, have fallen on hard times in recent years, but their fortunes changed for the better after they were bought by the state-owned oil company Rosneft last year.
The exodus of top NHL talent is expected to continue, with Philadelphia Flyers goalie Ilya Bryzgalov and Carolina Hurricanes forward Alexander Semin among others, reportedly ready to sign with KHL teams in the next few days.