The vastly experienced 65-year-old stepped down as Brazil coach after the World Cup following the host nation's failure to reach the final.
Scolari came in for a barrage of criticism after Brazil suffered the humiliation of a 7-1 hammering at the hands of Germany in the semi-final and then lost to the Netherlands in the third-place play-off.
Veteran coach Scolari has now opted to put that disappointment behind him by returning to Porto Alegre outfit Gremio 18 years after his last spell at the club.
The two-time Brazilian champions were in the market for a new coach after sacking Enderson Moreira at the weekend.
Scolari had a spell in charge of Gremio in 1987, then returned from 1993-96 and has now been charged with the task of guiding them up the table.
Gremio sit 10th in Brazil's Serie A, having won just five of their opening 12 matches of the season.
