Werder's sporting director Frank Baumann said the club has signed a performance-related contract with Pizarro, who is the highest-scoring foreign player in the Bundesliga's history with 192 goals in 446 appearances.
"I am delighted to have another chance to join the team and end my career at the club where I started out in Europe," said Pizarro.
Pizarro first moved to Bremen in 1999 from Alianza Lima in his homeland and spent two seasons there.
He returned in 2008, initially on loan from Chelsea before being signed outright, for another four seasons and came back for two more in 2015.
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He has also had two stints at Bayern Munich and spent last season at relegated Cologne, scoring one goal.
"I'm looking forward to sharing my experience, but I won't hide the fact that I'm coming back to score goals as well," said Pizarro, who was overlooked by Peru for this year's World Cup - their first appearance at the tournament for 36 years.
"I am convinced that together we will be playing a strong season together."
(Writing by Brian Homewood; editing by Sudipto Ganguly)
