Palermo started the campaign under Iachini, who was fired in November and replaced by Davide Ballardini. He was sacked in January after seven games at the helm.
Palermo appointed Guillermo Barros Schelotto but it transpired the Argentine did not have a coaching licence and could not sit on the bench.
On Jan. 26, Palermo hired Giovanni Tedesco and handed Schelotto a supervisory role until he got his licence.
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However, Schelotto resigned last week after UEFA turned down his licence application and Palermo announced that Bosi would take over as coach even though Tedesco had not been formally sacked.
Sunday's 3-1 defeat by Torino in Bosi’s first game in charge, however, prompted Palermo owner Maurizio Zamparini to bring back Iachini.
"I would like to thank president Zamparini for the nice words he spoke today about me," Iachini said.
"I return to Palermo with great enthusiasm for the good of the club, the team and the fans. Now we have to remain united and work hard day after day, with the desire to secure safety as soon as possible."
Zamparini asked the fans for forgiveness for "this month of chaos", adding that this had been due to his "wrong evaluation and misunderstanding" of Iachini.
"I would like to thank Beppe Iachini...who returns to the bench at a difficult time for the club," Zamparini added.
"I am sure that with his determination and work he will get the club out of this crisis of results, with the same spirit that took us from Serie B to Serie A. Staying up will be like another promotion."
Palermo have failed to win any of their last four league matches and are 15th in Serie A with 26 points from 25 games, four points clear of the drop zone.
(Reporting by Pritha Sarkar, editing by Ed Osmond)
