Earlier on Wednesday the Bild newspaper in Germany had reported that Schumacher would come out of retirement and drive for his former team, for whom he currently works in advisory capacity.
Ferrari confirmed the move on Wednesday afternoon saying the German would replace the injured Brazilian driver Felipe Massa until the end of the season.
"Scuderia Ferrari Marlboro intends to put Michael Schumacher in Felipe Massa's car until the Brazilian driver will be able to race again," Ferrari confirmed in a statement.
"Michael Schumacher said he is ready and, over the next few days, will undertake a specific training programme at the end of which confirmation will be given of his participation in the championship with effect from the European Grand Prix on the 23rd of August."
Schumacher said on his own website: "The most important thing first: thanks God, all news concerning Felipe are positive. I wish him all the best again.
"I was meeting this afternoon with Stefano Domenicali and Luca di Montezemolo and together we decided that I will prepare myself to take the place of Felipe.
"Though it is true that the chapter Formula 1 has been closed for me since long and completely, it is also true that for loyalty reasons to the team I cannot ignore that unfortunate situation. But as the competitor I am I also very much look forward to facing this challenge."
Schumacher, though, will first have to undergo a rigorous training programme as he is understood to still be recovering from neck and back injuries sustained in a motorbike test in Spain in February.
Massa, who suffered horrific head injuries in the Hungarian Grand Prix at the weekend, is still in intensive care following his crash which was caused when a metal spring from a Brawn GP car, driven by compatriot Rubens Barrichello, hit him as he was travelling at 170mph during qualifying on Saturday.
Massa was airlifted to the AEK military hospital in Budapest where emergency surgery was performed immediately before the Ferrari driver was induced into a coma.
However, after worries that the world championship runner-up might not race again, Massa's condition is no longer life-threatening and doctors revealed that fears over the potential damage to his left eye and sight had subsided.
Schumacher, who won 91 Formula One races in a sixteen-year career with Jordan, Benetton and Ferrari, retired from the sport in 2006, two years after he won his fifth consecutive world championship drivers title with the Italian manufacturer who had not won the title since Jody Scheckter's success in 1979.
The German's spokeswoman, Sabine Kehm, had said on Tuesday: "Usually, I would say he's not interested because he's fine with his life and he doesn't miss anything, but now the situation is so different – it's very hypothetical.
"The whole thing will be considered by Ferrari. If they approach Michael, then he will consider it."
Ferrari have done their part and Schumacher will return to an F1 cockpit for the final seven races of the season.