The FX drama's second season - subtitled Asylum - tells a story separate from season one, but has seen several stars from that first run reappear in new roles.
Series co-creator Ryan Murphy confirmed McDermott's return on Twitter, writing that he was "so thrilled" to have the actor back, but did not reveal any details about his new characters.
In the show's first 12 episodes, the 50-year-old played Ben Harmon, a philandering psychiatrist. McDermott joins season one co-stars Jessica Lange, Zachary Quinto, Sarah Paulson, Frances Conroy, Evan Peters and Lily Rabe in returning to the show.
Joining American Horror Story in season two are James Cromwell (LA Confidential), Chloe Sevigny (Big Love), Joseph Fiennes (FlashForward) and Maroon 5 frontman Adam Levine.
Clea Duvall (Carnivàle), Franka Potente (The Bourne Identity), Ian McShane (Deadwood) and Eric Stonestreet (Modern Family) have also landed recurring or guest roles on the horror drama.
American Horror Story airs on FX in the US on Wednesdays at 10pm. Season two will premiere on FX UK on October 30 at 10pm.
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Watch a promo for American Horror Story: Asylum below: