In return, the Cubs are sending prospects Kevin Made and DJ Herz back to the Nationals.
Candelario, 29, has 16 home runs and an .823 OPS for Washington this season. The home runs are just three shy of his career high set in 2018. For the year, he's hitting .258 with a .342 on-base percentage, appearing in 96 games at third base and two more as the Nationals designated hitter.
Candelario returns to the Cubs organization after he was signed by Chicago as a nondrafted free agent in October 2010, making his major league debut in five games with Chicago in 2016. He was traded to Detroit with infielder Isaac Paredes in a deal for catcher Alex Avila and pitcher Justin Wilson at the 2017 trade deadline.
"Funny how the baseball world works. My first spring training here, he was there as a teammate," Cubs manager David Ross said. "To be able to put up the numbers this year, and come over and help us out, is huge."
Cubs outfielder Ian Happ concurred.
"He's had such a good year. Awesome dude," he said. "Good defense at third and obviously the bat. We came up together. I'm excited to have him back."
"Obviously, he was awesome," Washington manager Dave Martinez said. "He was everything I expected and more. He did well for us, and we'll miss him, but he's going to go help the Cubs try to get to the playoffs, and win championships. So, good for him."
The switch-hitting, eight-year veteran could fill both roles for the Cubs as they've mixed and matched at third and designated hitter all season. Patrick Wisdom had a hot start to the spring but cooled off and is hitting only .195 while Nick Madrigal is a converted second baseman, though he's played well in short stints at third this season.
Candelario will play some first base and is expected to make his Cubs debut Tuesday as the series vs. the Reds continues.
Cubs designated hitters compiled a .229 batting average and .698 OPS this season before Monday's loss.
The Nationals received a Single-A shortstop in Made and a Double-A pitcher in Herz, both of whom were top-20 prospects in the Cubs system.
Chicago changed course over the last week, becoming a team that would add talent after winning eight straight games and pushing over the .500 mark for the first time since early May. Instead of subtracting pending free agents, the Cubs are adding them. The team also is searching for bullpen arms before Tuesday's trade deadline.
Later Monday, the Kansas City Royals traded right-handed pitcher Jose Cuas to the Cubs in exchange for outfielder Nelson Velazquez.
Cuas, 29, was 1-3 this season for Kansas City, with four holds and two blown saves. He made 45 appearances, and all but one came out of the bullpen.
Velazquez, 24, who was on Chicago's 40-man roster, was optioned to Triple-A Omaha. He hit .241 with three home runs and six RBIs this season for the Cubs.