After departing in 2013 in a €32 million move, the midfielder will head back to Anoeta eager to revive his career after failing to nail down a first team spot.
His former team agreed a deal with Real Madrid for an initial loan and had arrived for his medical on Wednesday morning.
He has spoken of his excitement at returning to his boyhood club.
The 25-year-old came up through the youth ranks of the Basque club and established himself as a mainstay there, leading to a move to Madrid as a long-term replacement for Xabi Alonso in the 2013 season.
However, the move to the Spanish capital didn't go well as he was relegated to the bench in Carlo Ancelotti's final season in charge.
New coach Rafael Benitez has also been unconvinced by the midfielder leading to rumours of a departure to English sides Liverpool and Southampton
However a move back to boyhood side Sociedad intensified after Illarramendi was left out of the Madrid squad that kicked-off their La Liga campaign at Sporting Gijon on Sunday.
The player was in San Sebastian to complete his medical. He said: "I'm happy to come back. La Real was always my first option. I'm excited to come back home," he told journalists at the airport.
An agreement on a season-long loan with obligation to buy set at €16m is expected to be finalised.
The Basque side are coached by ex Manchester United coach David Moyes.
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