The British rider, who broke his scapula on stage four in France when he ploughed into the barriers in a crash that led to world champion Peter Sagan being disqualified from the race, will be joined by 2015 winner Edvald Boasson Hagen and Mark Renshaw.
Africa-based Team Dimension Data also won last year's race with Steve Cummings and are gunning for a hat-trick on the eight-stage race that concludes in Cardiff.
Cavendish is a 10-times stage winner on the Tour of Britain.
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Team Sky have named a strong line-up for the race including Welshman Geraint Thomas - who has also been out of action since a crash in the Tour de France, where he wore the yellow jersey for the first few days - as well as Olympic omnium champion Elia Viviani.
(Reporting by Martyn Herman)
