Rabe - who played Nora Montgomery in the first season and Sister Mary Eunice McKee in its follow-up Asylum - will return in a new guise for the FX drama's next run.
Series co-creator Ryan Murphy confirmed the 30-year-old star's casting on Twitter, writing: "So thrilled to announce Lily Rabe is onboard for American Horror Story season three! So talented, love her!"
Rabe joins the previously-confirmed Jessica Lange, Evan Peters and Sarah Paulson in the new episodes.
Season one's Taissa Farmiga is also "in talks" to play a new role, while Lizzie Brocheré, Mark Margolis and Chloe Sevigny have also expressed an interest in returning for the third season.
Season two of American Horror Story concluded on January 23 in the US. The show airs on FOX in the UK.
> American Horror Story Ryan Murphy 'knows what season three will be'
Watch a promo for the American Horror Story: Asylum finale below: