Laser will return to the horror series along with sequel lead Laurence R Harvey, but the pair will play new villains rather than reprise their previous roles.
Director Tom Six has promised that the third entry in the series will be "very politically incorrect" and feature "a megalomaniac 500+ human centipede".
Human Centipede 3's development was pegged back by a legal battle between Six's production company and Laser, but the matter has now been resolved to the satisfaction of both parties.
Six said: "I know my Human Centipede 3 will be very politically incorrect, but I didn't want to change anything in the script.
"I am very happy Dieter will follow my vision for a full 100% now and know he is absolutely the most brilliant actor I could wish for."
Laser added: "I never ever would have thought that all our differences and misunderstandings would in the end lead to an even deeper and warmer understanding and appreciation of each other.
"In this regard I am actually thankful about the whole fuss because it turned out to be an advantage and a wonderful present for our film and for our friendship."
The Human Centipede 3 will begin shooting in May this year.
Watch a trailer for The Human Centipede 2 (Full Sequence) below: