Garcia announced his retirement in January after two-and-a-half seasons in Mexico but revealed on his Facebook page on Monday that he will return to play for Kolkata, which will be one of the eight inaugural clubs in the new Indian competition.
Each club is allowed one marquee player and Garcia will fill that spot for Kolkata.
"I'm very excited to share with you my new challenge, I've decided to join Atletico de Kolkata in the new Indian Super League," Garcia wrote.
"Thanks for all your support."
The 36-year-old previously played for Atletico Madrid, Barcelona and Liverpool - winning the UEFA Champions League with the latter.
Kolkata, which is partially owned by Atletico Madrid, as well as former India cricketer Sourav Ganguly, was formed earlier this month and Garcia becomes just their third player.
Another Spaniard - former Getafe and Real Valladolid defensive midfielder Borja Fernandez - as well as Botswana international Ofentse Nato have already committed to the club.