England controversially called time on their all-time leading run-scorer's international career last week, after he was omitted from the squads for the upcoming tour of the West Indies and the World Twenty20 in Bangladesh.
A statement by the England and Wales Cricket Board on Sunday said Pietersen had been axed for showing a lack of "support" to captain Alastair Cook.
However, Surrey director of cricket Alec Stewart, a strong supporter of Pietersen throughout the furore, had no qualms in retaining the services of his fellow former England captain for a revamped domestic Twenty20 season of 14 matches.
"BTW (By the way) -- this is a T20 contract, but I can play in the County Championship too," tweeted Pietersen.
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Stewart hailed the new contract as "good news" for the English domestic game where an expanding international schedule means leading England players are rarely seen on county duty.
"We are delighted to have agreed terms with Kevin, and to have a player of his ability at The Oval," said Stewart in a club statement.
"Unsurprisingly there was a great deal of interest in Kevin from around the world, but he has made it very clear that he wants to play at Surrey and it is not only good news for the club but for the domestic game in this country.
Pietersen, whose stunning maiden Test century of 158 against Australia that secured England's 2005 Ashes win was made at The Oval, said: "I'm absolutely delighted to have agreed terms with Surrey and am thoroughly looking forward to playing my cricket for the club this summer.
"I've had some of my best moments in cricket at The Oval and I'm really excited at the prospect of getting back out there playing in what will hopefully be a brilliant summer for us all at Surrey.