The 26-year-old, who departed last summer having been an integral part of United's run to National League North play-off glory, has left Scunthorpe United to seal his return to the Jakemans Community Stadium.
It will be Nicholson's third spell with the Pilgrims, having previously amassed 62 appearances and four goals – playing under the management of both Paul Cox and Ian Culverhouse to date.
Nicholson will wear squad number 17 on his return to Pilgrim Way.
The transfer is subject to final National League and Football Association approval.
PIC: Lee Keuneke.