The 54-year-old Irishman lost his place on the TV singing contest's judging panel in March, but has been reinstated after Friedman asked Simon Cowell to change his role on the show.
Walsh pledged not to hold a grudge, saying: “In spite of all the bantering, I have continued to have a good working relationship with Simon, ITV and the show’s producers and I am thrilled to be asked back on the show."
It was announced earlier this month that pop star Dannii Minogue and Friedman, who recently appeared on ITV1's musical talent hunt Grease Is The Word, had joined Simon Cowell and Sharon Osbourne on the judging panel.
However, Friedman's new role as creative director will enable him to use his 15 years of experience as a dancer and choreographer. The 30-year-old said: "I'm ecstatic to finally put my true skills to the test. The British public has only seen what I've been able to do from afar through the music videos and stage shows I have worked on."
Paul Jackson, ITV’s director of entertainment and comedy, added: "We are thrilled to have Louis back on The X Factor and look forward to working with Brian in his new capacity."