The 27-year-old had been on loan from Doncaster Rovers at Rugby Park, where his father Kenny is the manager, and then signed a six-month deal which expired in the summer.
The Northern Ireland international scored the winner against Rangers for Killie on February 18, 2012 - just four days after the Light Blues went into administration.
He also played in the Kilmarnock team that defeated Celtic in the League Cup final a few weeks later.
Shiels began his career with Hibs in 2004 and spent over four years at Easter Road before moving to Doncaster.
He scored 15 goals in 43 appearances for Killie in his season in Ayrshire and was short-listed for the PFA Scotland Player of the Year award.
His first season at Ibrox began well, and he hit a double as Rangers celebrated their return to football at Ibrox with a 4-0 defeat of East Fife.
Shiels also scored in Rangers' uplifting 2-0 victory over Motherwell in September.
His form with Rangers earned him a call-up to the Northern Ireland national team – and he scored the opener in the Ulstermen’s 1-1 draw with Luxembourg.
Tricky and with an eye for goal, Shiels looks to be a major part of Ally McCoist’s blueprint to take Rangers back up the leagues.