The forward returns to the Banks’s Stadium after spending the 2013-14 season on loan at the Saddlers from Chelsea.
Lalkovic then moved to Czech club FK Mlada Boleslav before joining Barnsley in January.
The 22-year-old scored six goals in 42 games in his first spell at Walsall but failed to net in 17 games for the Tykes.
“I’m really pleased to have Milan back on board,” said manager Dean Smith. “He did well for us before; there is a lot of potential in him and now that he is our player, we can be committed to the ‘Milan Lalkovic project’ and getting the best out of him.
“He’s full of enthusiasm and energy and is a real talent. By the same token, he knows exactly what we are all about and the way we work here.
“He will have learned a lot from his successful loan spell with us and will also have learned from the disappointments he faced last season.
“Hopefully he can hit the ground running and I certainly believe that he will improve our team.”