Jago was suspended along with other senior executives last year. Chief executive Dave Lewis carried out an investigation into a £263 million shortfall in the retailer's profits last year.
But Jago will return to Tesco in March as category director for wine.
Leading suppliers have welcomed the decision.
Paul Schaafsma, UK and Ireland head at Accolade Wines, told OLN: "I'm delighted Dan has been reinstated. He is a leading figure in the trade and deserves the trade's support. He has achieved a great deal for the industry throughout his career and I look forward to welcoming him back."
Another supplier said: "Dan has always been a great person to deal with and he's a real asset to Tesco."