The 34-year-old defender enjoyed a successful loan spell at the Amex Stadium over the second half of last season, making 20 appearances including both legs of Albion's ultimately unsuccessful play-off semi-final against Crystal Palace.
And the Seagulls, under new head coach Oscar Garcia, have moved for the free agent following his summer release by Stoke.
Brighton's head of football operations David Burke told the club's official website: "We are delighted that Matt has agreed to come back to the club. His experience is fantastic and it really shows our intent by bringing in someone of Matt's pedigree.
"It's not like he's a new signing because he's been with us for almost six months and he knows exactly what we are all about. He brings continuity and stability to the defence, which is what we were looking for, and it bodes well for us to keep the strong defence that we had last season."
Upson will travel with the Seagulls for their pre-season training camp in Madrid, which starts on Sunday.
Burke added: "His experience will bring more impact to the players as he spends more time with them, particularly during pre-season, which is a key time for tactics and strategies to be embedded into the players. Matt has experienced that at the highest level.
"We finished with the best defensive record in the league and we will build on that for the coming season."