The Brazilian giants claim the 25-year-old turned down offers from Santos, Gremio and Cruzeiro to return to Morumbi on a free transfer
Former Arsenal midfielder Denilson has rejoined Sao Paulo on a permanent deal after being released by the Gunners.
The 25-year-old arrived at the Emirates Stadium as a teenager in 2006 and made 108 appearances in all competitions, but never managed to hold down a regular first-team place.
A lack of action saw Denilson shipped out to Sao Paulo on loan in each of the last two seasons, and earlier this month he was released, along with Andrey Arshavin and Sebastien Squillaci, following the expiration of his contract with the north London side.
On their official website, the Brazilian giants claimed the midfielder had turned down offers from rivals Santos, Cruzeiro and Gremio to rejoin the club on a permanent basis.