Local boy Davies left Stradey Park in June 2008 to join Brive, returning to Wales briefly for a short spell with the Ospreys before going on loan to London Welsh. He signed for French club Dax in July 2010.
The 25-year-old Davies said he was pleased to be back on home soil after returning from his French spell: "It's great to have this opportunity to come back home. I've learnt a lot from being involved in rugby in France and it's been a different type of experience and I just jumped at the chance to be back in a Scarlets shirt and playing my rugby at home in Wales."
Davies will provide cover at a key part of the season for the region following news that Tavis Knoyle will undergo surgery for a shoulder injury.
"There are some really promising young players coming through the Scarlets now and it's good to be back with the boys from our region that I knew when I first started out like Rhys Priestland, Josh Turnbull, Jon Davies, Scott Williams, Ken Owens and others and seeing them progress so quickly and get international honours," he said.
"I'll give my all to this opportunity and hopefully pass on some of my wider experience to a group of talented scrum halves already at the Scarlets - Gareth Davies, Rhodri Williams and Aled Davies when he comes back from injury - without doubt all of them have promising futures ahead of them."
Head of Rugby Nigel Davies, who worked with Davies when he was on a development contract at Parc y Scarlets said: "We have two very impressive young Scarlets scrum-halves in Gareth Davies and Rhodri Williams who are pushing for the jersey right now; however we know that with Tavis out injured and international commitments ahead we needed additional cover in this position.
"The timing has worked really well for us as Liam's made himself available after the French club he was with had to release a number of players. To have the opportunity to bring someone of Liam's quality, background and experience of the big matches into our squad at this crucial time in our season is very positive."