Buddle, formerly of Hartlepool and Blyth Spartans, looked set to put pen to paper on a short-term contract with Keith Curle’s side but has opted to return to the north east with The Heed.
Blues boss Curle revealed that he had been considering sending the 21-year-old central defender out on loan to Gateshead next season.
“Nathan spoke to us and felt he would get more opportunities for first-team football by making this move,” Curle told the club’s official website.
“We always saw opportunities to play first-team football as part of his development path.
“Gateshead was one of the options we were looking at to make sure he got that at the start of next season.
“It will be a good club for him and we know they will look after him.
“We wish him well as he heads back to the north east.”
Buddle joined Carlisle from Blyth in January, making two substitute appearances and starting the final game of the season against former club Hartlepool.