It will be 29-year-old left hander Katich's third spell with the County where he scored more than 2,000 runs in 2003 and played the final month of last season.
Hampshire director of cricket Tim Tremlett said: "Simon is a quality batsman and useful left-arm spinner who has proved himself in English conditions.
"He's done very well for us in the past and is extremely popular in the dressing room."
How often Katich plays at the Rose Bowl will, however, depend largely upon his international duties.
He will definitely play at the start and end of the season, and Hampshire will have to wait and see if he is picked for Australia for their Ashes Test series and the NatWest triangular One-day matches.
If Katich, who will be joined by international colleague Shane Warne at Hampshire, is selected for the One-dayers he will leave the club in early June, while if he is selected for the Tests he will depart after July 11.
Hampshire are currently looking for an overseas replacement for when Katich is away. Katich, who has also played for Durham and Yorkshire, is currently with the Australian squad in New Zealand.