The British and Irish Lion, 27, left for France in 2014 and will return for the 2016-17 season.
In a joint WRU-Scarlets statement, Davies said: "The time is right to return to Wales and signing a [dual contract] is the best decision for me."
Davies has 48 Wales caps, but a knee injury ruled him out of the World Cup.
Davies left Scarlets to join Clermont Auvergne on a two-year contract before the 2014-15 season. He is expected to return for the French club during December.
The WRU tweeted: "Welcome home Jon! @JonFoxDavies returns to Wales and @scarlets_rugby on National Dual Contract."
WRU chief executive Martyn Phillips added: "His return demonstrates the value of the NDCs as a means of ensuring as many of the most talented players as possible play their rugby here in Wales.
"Here in Wales our four regions are ambitious for success and the WRU will continue to work alongside them to achieve that."
Scarlets chief executive Darran Phillips said the signing was "further evidence of our ambition to be competitive at the highest level".
Davies was part of the Clermont side that lost to Toulon in the 2015 European Champions Cup final at Twickenham.
A few weeks later Davies ruptured his anterior cruciate ligament, ruling him out of the World Cup.
He is the 17th player to sign a dual contract, which give the WRU greater control over players in return for paying 60% of their wages.
Former Wales dual-code wing Adrian Hadley says Davies' signing is "good for Scarlets and for Wales and Welsh rugby".
But Hadley believes the WRU and regions should prioritise signing rising talent rather than established stars who have moved out of Wales
"It's good to have players like Jonathan Davies playing within Wales, no shadow of a doubt," said Hadley.
"But I would look at the younger players to actually dual-contract rather than actually spend money on players that have decided to play their rugby out of Wales out of their own choice, really."

The Plymouth Leander swimmer, 21, is hoping to compete in the 50m and 100m freestyle events in Rio this summer.
"This year we've definitely upped the ante in the gym and tried to get a lot stronger," Proud told BBC South West.
"Obviously for the 50m you have to be strong, you have to be big and you have to be good in the water."
Proud, who won two Commonwealth gold medals at Glasgow in 2014, broke Foster's 14-year-old short-course 50m freestyle British record by clocking 20.74 secs in December.
He also improved his own long-course record in the same event with a time of 21.73 at the British Universities and Colleges Championships in Sheffield on Saturday, where he won two golds.
"I think Mark Foster definitely set the trend that you don't have to do a huge amount (of training) in the water, especially for a sprint event which lasts 21 seconds," added Proud.
"At the same time I'm still focusing on the 100m, which means I have to spend a lot more time in the water - so I'm mixing them both up a bit.
"I'm just looking to better my performances and hopefully see that record get faster and faster."
Wales centre Jonathan Davies will return to Scarlets from Clermont Auvergne on a dual deal with the Welsh Rugby Union.
[NEXT_CONCEPT]
Ben Proud says he is following the "trend" set by former world champion Mark Foster by spending more time in the gym ahead of the 2016 Olympics.