The former Dudley councillor and MEP will serve as economic spokesman under interim leader Neil Hamilton, who took over earlier this month after the suspension of previous leader, Freddy Vaccha.
He says he has returned to the fold because UKIP is the only party which can tackle issues including "the incessant government state power grab", looming economic disaster, organisations such as Black Lives Matter and others "trying to destroy our heritage and our history", and "the old favourite of immigration".
He said: "Under the leadership of Neil Hamilton this is a party that is now back, it's a party that is going to make a difference, and I would hope that many people will do the same as I have done and rejoin UKIP.
"UKIP is back, and UKIP is standing up for Britain."
Mr Etheridge, who said he is considering standing as a candidate in next year's local council elections, said UKIP was "a very different beast" from the one he left.
"It has changed completely and is now the type of party that it was during its period of great success," he said.
"We may only have a fraction of the support we once had, but all that can change and the time is right for a real right of centre party to come back that will look after businesses and jobs."
Mr Etheridge initially joined UKIP in 2011 and made three failed leadership bids in the wake of Nigel Farage's decision to stand down following the 2016 EU referendum.
He quit in October 2018, saying the party was viewed by voters as a "vehicle of hate towards Muslims and the gay community".
He briefly served as chair of the Liberation Party, then joined the Brexit Party in February 2019, before falling out with the party's leadership over its general election strategy and endorsing the Tories.
He was a West Midlands Euro MP for five years.