The 31-year-old Scotland international left the Seagulls at the end of last season after scoring 24 goals in 122 appearances during a four-year spell. He impressed with 80 goals in over 185 appearances for the Posh between 2007 and 2011.
Mackail-Smith was sidelined with a serious Achilles injury which kept him out between March 2013 and April 2014 but is raring to go this season after making the move to Kenilworth Road and has targeted promotion.
He told the club’s official YouTube channel: “To score goals…I’ve missed it.
“I scored a few goals last season but nowhere near as many as I wanted. That’s my job, I love doing it. I’ve come here to score as many goals as I can and help push this team to win the league.
“I feel this club has a fantastic chance to push through the leagues and I want to be a part of that.
“I want to enjoy my football again and I know that this club is going places. (Manager) John Still has put together a fantastic squad with great quality. This team can definitely challenge at the top this season.”