“The new management team has impressed me and I can’t wait to get started.”
Mahon made made 144 appearances in his first spell with Tranmere and was a member of the side that reached the League Cup final at Wembley Stadium in 2000.
He joined Sporting Lisbon later that summer and played Champions League football before returning to England in a £1.5 million move to Blackburn Rovers a year later.
Mahon spent three seasons at Ewood Park before joining Wigan in 2004 and then Burnley in 2006. He has made more than 350 career appearances.
The Dubliner is the second experienced player to sign up for the new Barnes/Jason McAteer management partnership after striker Ian Moore agreed a new two-year deal last week.
Rovers will be looking to recruit a goalkeeper before they start a programme of pre-season friendlies next week after both Danny Coyne and John Achterberg left the club during the summer.
Barnes reiterated his plans to make extensive use of the loan system for the forthcoming season.
