Neil Christopher Prakash, 31, was arrested in Turkey in 2016 after entering the country from Syria.
Prakash was sentenced to seven years in prison by a Turkish court in 2019, who found him guilty of membership in a terrorist organization.
The Australian Federal Police said Prakash arrived in Australia by plane on Friday morning.
“An investigation started in 2016 when the man allegedly traveled to Syria to fight with the Islamic State,” it said in a statement.
“The AFP will claim in court that the man has committed a series of serious terrorist crimes.”
Authorities estimate that some 230 Australians have traveled to Iraq and Syria to take up arms since 2012 – Prakash being one of the most prominent examples.
He was featured in IS recruitment videos urging Australians to “wake up” and join the group.
Prakash was described by former Conservative Prime Minister Malcolm Turnbull as one of the “key funders or organizers” of Islamic State in the Middle East.
Former Australian Attorney General George Brandis said in 2016 that Prakash had been killed in Iraq following a targeted US airstrike.
It was later confirmed that he was injured but not killed in the blast.