Wyoming athletics officials announced Thursday that Shyatt has agreed to a five-year contract. He replaces Heath Schroyer, who was fired in February.
Shyatt's base pay will be $190,000 a year, up from $160,000 for Schroyer. He can earn as much as $645,000 a year with incentives.
Shyatt, 59, previously was the Cowboys coach during the 1997-98 season, when he led the team to a 19-9 record.
"We are thrilled to bring Larry [Shyatt] back to the University of Wyoming," said Wyoming athletic director Tom Burman in a statement. "He did a great job in his one season at UW, taking us to the NIT, and the players he recruited to Wyoming paid dividends for our program throughout their careers. ... He has had the opportunity to sit next to and coach with one of the premier coaches in America in Billy Donovan."
Shyatt spent seven years at Florida and helped the Gators win the 2006 and 2007 NCAA championships plus three Southeastern Conference tournament titles.
"I'm truly thankful for the opportunity given by President [Tom] Buchanan and [athletics director] Tom Burman to return to Laramie and the University of Wyoming," said Shyatt. "The experience my wife Pam and I had in Laramie, and the many people we met in the state, has always been among our fondest memories in over 30 years of coaching.
"I've spent seven great years at the University of Florida helping to build a championship-caliber program, and this is one of the only places I would have considered leaving for."
Shyatt has spent 35 years as a college coach. He was associate head coach at Clemson before Wyoming hired him the first time. After his year at Wyoming, Shyatt returned to Clemson to be head coach there for five seasons.
"I'm excited about the commitment of the administration and the passionate fan base I remember at Wyoming," he said. "I can't wait to meet, work with and develop a great relationship with the current team."
Shyatt also has coached at Providence, Utah and New Mexico.
Wyoming finished 10-21 and just 3-13 in the Mountain West Conference this season. Over three and a half years under Schroyer, the Pokes were 49-68 with their only winning season coming in 2008-09.
Andy Katz is a senior college basketball writer for ESPN.com. Information from The Associated Press was used in this report.