The 25-year-old arrives at St. Andrew's on a three-year deal for an undisclosed fee.
The full-back made 28 appearances for Blues between September 2012 and April 2013, when he returned to the County Ground.
Blues boss Lee Clark moved quickly to bring in the popular Scot just days after right-back Neal Eardley hobbled off in the first-half of Saturday's 1-1 home draw with Ipswich Town. A scan has since revealed that the Wales international sustained knee ligament damage and is set to be sidelined for a matter of months.
Caddis, a former Scotland U21 international, began his career with Celtic and made 24 appearances for the Bhoys. He also gained experience out on loan with Dundee United before moving south of the border to link-up with Swindon in 2010. He quickly established himself as a first-team regular at the County Ground and captained Swindon to the League Two title in 2012.
Clark told bcfc.com: 'I'm delighted to bring Paul back to the club. He's obviously a player that we know very well and certainly not a gamble as he did the business for us last season.
"With Neal Eardley's situation it was important that we brought in another defender and, to add to that, Paul is a specialist right-back. When Neal returns we are going to have ourselves two very experienced right-backs."
Caddis will wear first-team squad number 31.
We hope to bring you an an exclusive interview with Caddis via the club's official YouTube channel
tomorrow afternoon but in the meantime tweet your thoughts on his return using #WelcomebackCaddis