Millsap's return helps shore up Denver's rotation, which took a hit with Jerami Grant's departure to Detroit.
Denver also has pulled the qualifying offer on forward Torrey Craig, which allows him to become an unrestricted free agent, a source told ESPN's Adrian Wojnarowski. The Nuggets have valued Craig, but ran out of roster spots for him.
Millsap spent the past three seasons helping shepherd a young Nuggets team to the next level. He joined the team as a marquee free agent, signing a three-year, $90 million deal in 2017.
While Millsap provided the Nuggets his typical stalwart defense last season, he saw his numbers hit career lows across the board as his playing time was cut down to just over 24 minutes per game.
Millsap did shoot a career high from 3-point range (43.5%), although that shooting crashed down to earth in the playoffs.
The 35-year-old made four straight All-Star teams as a member of the Atlanta Hawks after spending the first seven years of his career in Utah.
Millsap holds career averages of 14 points and 7.3 rebounds.