The 30-year-old had an unsuccessful loan spell at Bayern Munich as he has only contributed 1 goal and 1 assist in his 11 Bundesliga appearances for the Bavarians.
However, the Brazilian will return to his home country after struggling to settle at another European home. The move brings an end to a decade-long spell in Europe that has seen him win league titles in three different countries.
The official Gremio website announced Douglas Costa’s return in a tweet, saying: “Welcome home, Douglas Costa!”
Costa started his career at Gremio before joining Shakhtar for a $8.80m deal in 2010. After an eye-catching spell at Ukraine, the Brazilian earned a $33.00m move to Bayern Munich in 2015 and had his career shattered in short spells at Bayern Munich and Juventus.