Grainger, 35, returns to Borough Park having left last summer to take up as assistant coach position at Falkirk.
He succeeds Chris Willcock, who departed last week after the club failed to earn promotion from the NPL West Division.
Grainger told the club’s official website: “It’s great to be back with the people at the club.
“Hopefully, we can buld together on the success of the past two seasons on and off the pitch.”
The former Carlisle United captain, who played in the Scottish Premier League for Dundee United, St Johnstone and Hearts, was previously in charge from 2019 to 2021.
His departure last summer came as a surprise, as he had only signed a new two-and-a-half-year deal in February 2021.
Grainger’s time at Falkirk came to an end in December after he had been briefly put in caretaker charge following the sacking of Paul Sheerin.
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