The 28 year-old, who played spent two seasons with Gloucester between 2001 and 2003, rejoins the Kingsholm club from French team Pau in the summer.
In the 2001/02 season Mercier became the only English-based player ever to score more than 500 points in competitive matches for his club in a season, finishing the Zurich Championship winning year with 508 points.
Commenting on www.gloucesterrugbyclub.com director of rugby Nigel Melville said: "Ludo doesn't need any introduction to anyone here at Kingsholm, we're well aware of his top-class ability and points scoring record."
Mercier completed the paperwork this week that will see him sign up at Gloucester at least until the summer of 2008.
"It's great news and is another piece of the plan confirmed for the 2005/06 season, following on from Mike Tindall, Patrice Collazo and Peter Richards, as well as some of the current players signing new contracts."
Mercier currently sits in 13th place in the all-time Zurich Premiership points scoring chart with 592 points.
The French stand-off has racked up 255 points during the current French season for Pau, with four games still to play.
Ludovic Mercier Profile:
Position: Fly-half
Date of birth: 01.11.76
Height: 1.80m
Weight: 90.5kg
Previous clubs: Pau, Grenoble, Aurillac
Zurich Premiership record for Gloucester: 43 appearances and 592 points.
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