With 187 NRL appearances and a premiership, Townsend is a quality signing for the club, particularly with first-choice half Chanel Harris-Tavita ruled out for the remainder of the season due to a pectoral injury.
His signing follows that of Kiwis captain Dallin Watene-Zelezniak, who was also granted an early release from his contract with the Canterbury Bulldogs to join the Warriors with immediate effect.
Watene-Zelezniak will remain with the club after the 2021 season, signing on until the end of 2024.
"The timing couldn't be better for us being able to sign Chad," Warriors chief executive Cameron George said.
"Bringing in Chad as well as Dallin gives us enormous experience and leadership which will be invaluable for us as we look to resume our season following the bye round."
Townsend established himself as a first-grade quality half during his time with the Warriors, after playing just 19 games across three seasons with the Sharks from 2011. In his two seasons with the Warriors, Townsend proved to be a quality kicking option and showed his playmaking ability – assisting on 19 tries during the two-year stretch. He left the Warriors following the 2015 season on compassionate grounds to return to Sydney, and was a vital part of the Sharks' 2016 premiership-winning campaign.
Both he and Watene-Zelezniak will be available to play for the Warriors in their round 16 match against the St George Illawarra Dragons next Friday. There is no NRL this weekend, with State of Origin II being contested in Brisbane on Sunday.