The 32-year-old was appointed Dragons academy skills coach last May at the end of his playing deal with the Rodney Parade side but won't be hanging up his boots.Rees made 20 appearances last season and showed that he still has plenty to give on the field despite his long-standing desire to move into education.
Bayonne looked into tempting him to France as they attempt to return to the Top 14 while big-spending Swalec Championship promotion hopefuls Merthyr were also said to be interested.
However, the nine-times capped half-back will instead ply his trade for the men from Pandy Park, who in 2014/15 qualified for the Principality Premiership play-offs for the second successive year and were Swalec Cup semi-finalists.
"We are over the moon to have signed Richie," said head coach Greg Woods. "It's a real fillip for the club and is a statement of our intent.
"Richie is a quality player with a strong character and a wealth of experience. He is good friends with (backs coach and former Wales full-back) Morgan Stoddart and when we met with him it was clear that he still has the hunger to play.

Dunvant Rugby Club congratulate Richie and yet another chapter in his riugby career and wish him every success at Cross Keys.Richie played all his mini,junior and youth rugby at Dunvant progressing to be a star in our 1st XV before moving onto a superb career and achieving 9 Wales caps.