Raffael, 27, spent four years at Hertha Berlin before his move to Kiev in the summer and his Bundesliga record reads 23 goals from 110 games.
He has scored once in nine games for Dynamo this season and has welcomed the chance to return to Germany to recover his form.
"I am honoured to wear the Schalke shirt and I am thrilled to return to the Bundesliga," he told the club's official website. "The fans can rest assured I will give my best to make Schalke successful."
Schalke have also been linked with another Brazilian winger in Lyon's Michel Bastos following an injury to Netherlands international Ibrahim Afellay.
"Due to our persistent injury problems - for example, losing Ibrahim Afellay for at least two months - we have decided to once again be active in the transfer market," said general manager Horst Heldt.
"We are pleased to have the commitment of Raffael - it increases our opportunities in attack. Raffael will have no problems settling in as he has already played for four years in Germany."
The midfielder has represented Dynamo in the Champions League this season so is ineligible for Schalke in the knockout stages.