The Heat did not disclose terms of the deal, but sources said Wade received a two-year, $31.1 million deal with a player option for the second year.
The sources said Wade took about an $11 million pay cut over two years from the deal he opted out of, which was for two years and $42 million.
Wade took to Twitter on Tuesday to announce the agreement.
Wade later released a statement on his decision to re-sign.
"I am proud to have spent every single day of my career as a member of the Miami Heat and to have brought three championship titles to this great city," the statement said. "I've been here through the good times and the hard times. I have confidence in the Miami Heat organization and the team they are building. To all the Heat fans, in Miami and around the world, I know you will continue to show support for our team."
Heat president Pat Riley also commented on Wade in a statement issued by the team to confirm the signing.
"Dwyane has been the franchise cornerstone for this team since the day he arrived 11 years ago," Riley said. "He has shown his commitment to the Heat many times over the course of his career and has always been willing to sacrifice in order to help build this team into a champion. This time is no different. I am ecstatic to have him back in the fold and I am confident that Dwyane, as always, will be leading this team as we look to contend for NBA championships."
With the Heat's recent moves, including getting commitments from Chris Bosh, Luol Deng and Chris Andersen and signing Josh McRoberts, Mario Chalmers and Danny Granger, the Heat have positioned themselves to give Wade a contract that starts at about $15 million per season. He is expected to sign for up to four years.
Wade played just 54 regular-season games in 2013-14 as he dealt with various knee injuries, and the Heat often held him out to rest him. He averaged 19 points, 4.5 rebounds and 4.7 assists per game on a career-high 55 percent shooting. He averaged 17.8 points per game during the playoffs.
He is taking roughly a $5 million pay cut from the two years and $42 million he opted out of to become a free agent last month.
Wade's pay cut, the second time in his career he's taken less to stay with the Heat, helped free up money to give Bosh a five-year, $118 million max contract and Deng a two-year, $20 million deal.