The Wales international, 32, was a free agent after leaving Leicester City, who were relegated from the Premier League last term and will come up against the Reds in 2025-26, and has signed a two-year deal at his home-town club.
A product of the Racecourse academy, Ward played once for the Reds in a Welsh Cup tie before joining Liverpool in January 2012 for a fee of around £100,000.
Successful loan spells at Aberdeen and Huddersfield followed before Ward completed a move to Leicester for around £12.5 million in July 2018 having made three appearance during his time at Anfield.
Ward spent seven seasons with the Foxes and now returns to his hometown club where he will compete with Arthur Okonkwo and Callum Burton for a place between the posts, with Parkinson hailing the quality of goalkeepers at his disposal.
"I am pleased to get Danny," said the Reds' boss.
"He is an experienced goalkeeper, he's got his connections with the club and the area, and he was keen to come back.
"It is a strong addition to the group.
"It is important to get the goalkeeper department strong, it is a vital component of any team.
"We wanted to get that department as strong as we possibly could going into a new division and the season ahead."
First choice keeper Okonkwo kept 19 clean sheets in League One last season as Wrexham secured an historic third successive promotion while Burton also impressed when he got his chance when the ex-Arsenal man suffered a broken wrist but then sustained an injury of his own.
"We were pleased with Callum, he did well until he got his injury, while Arthur speaks for himself. He's been a fantastic signing," added Parkinson, who decided to release veteran stopper Mark Howard as well as Brad Foster and Liam Hall at the end of last season.
"But Danny coming in offers great experience and he's played at higher levels so it's a great fit for us."
Despite only making 52 appearances in all competitions in seven seasons with Leicester, Ward has gone on to win 44 caps for his country.
He was part of the Wales squad that reached the semi-finals of Euro 2016, and also made appearances at Euro 2020 and the 2022 World Cup.
Parkinson says that Ward hasn't just come to sit on the bench at Wrexham and is determined to get in the side.
"Absolutely," he added. "It's a key balance for goalkeepers where they work together but there's also that competition for places - we are striving to get that in all positions.
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"Danny's a good age for a goalkeeper.
"He's done well for Wales with his performances in a lot of key games when he's not been playing regular football.
"You shouldn't underestimate how difficult that must have been but he's represented his country.
"I am pleased to have Danny's ability but also his professionalism and character in the group."