He resigned after News Corp, his father Rupert’s global media business, failed to push through a takeover.
It owned 39% of what was then BSkyB. This stake was passed to film company 21st Century Fox where he was appointed chief executive last June.
James also resigned as chairman of News International, the owner of The Times and The Sun, amid the phone hacking scandal.
His return to Sky may signal another effort to buy the company as his octogenarian father shows his determination to build a Europe-wide broadcaster. Two years ago BSkyB merged with Sky Italia and Sky Deutschland and Mr Murdoch senior has hinted at reviving the bid for Sky.
It has been claimed that external shareholders were not consulted on James Murdoch’s return as chairman.
He will replace Nicholas Ferguson, who has been a director for 12 years and chairman since 2012.
Martin Gilbert, chief executive of Aberdeen Asset Management, will become deputy chairman, and Andrew Sukawaty takes on the role of senior independent director.
Jeremy Darroch, chief executive, said: “We’re delighted that James Murdoch has agreed to step into the role of chairman.
“James’ deep knowledge of the international media industry and his passion for supporting Sky’s ongoing success will make an even greater contribution to our business in the future.”
The announcement came as Sky reported record half-year profits on the back of strong customer demand for its subscription television services and broadband offering.
Operating profit in the six months to the end of December rose by 12% to £747m on a 5% increase in revenue to £5.7 billion.
In the second quarter it added 337,000 customers, which marked its biggest growth in its home market in a decade.
Analysts said the figures suggest that Sky has largely managed to counter the loss live European Champions League football to BT Sport, with which it shares the rights to show live Premier League matches.
Nicholas Ferguson said: “It’s difficult to find the right time to step down from chairing a great company and working with an outstanding board and management team. I joined the Board 12 years ago, in 2004, meaning that I have been with Sky for nearly half its life. When I became chairman in 2012, I wrote in the annual report that I would stay on long enough to ensure continuity. The then virtually new board is now seasoned and bedded in. We have completed major international acquisitions in Germany and Italy; they are running to plan and we have first-class management in place. Sky continues to grow impressively, to innovate with wonderful products and to serve its customers to the highest standard. So now is the right time for me to step back. I am sure that the company will continue to prosper under the leadership of Jeremy supported by James and the board.”
James Murdoch commented: “I would like to thank Nick for his outstanding contribution to the Board over the last decade and more. I am proud to have been asked by the board to serve as chairman of Sky. Jeremy and the team at Sky have done an outstanding job in building a dynamic and successful company.”
Martin Gilbert added: “I would like to give the warmest thanks to Nick for the major contribution he has made to Sky. He has provided valuable leadership as chairman and played a significant part in the company’s progress over many years. I am very pleased that James has agreed to succeed Nick. Having seen first-hand James’s contribution to and passion for Sky, the board feels he is uniquely qualified to become chairman. I am also pleased that Andrew Sukawaty, with his meaningful experience in public companies and in our industry, has agreed to serve as Sky’s senior independent director.”