Fenton returns to the club after the surprise departure last week of Terry Mitchell, who left the club after just one game into the start of the new season.
Fenton, a player/assistant at Croft Park, make 131 appearances and scored 18 goals, as well as having a brief spell as caretaker manager back in 2004.
After leaving Spartans in 2009, he went on to have a short playing spell at North Shields before taking over the side in 2012.
Fenton had a successful time with North Shields leading the club to the Northern League Division Two title in 2014 and the FA Vase in 2015.
A year later, he crossed the Tyne to manage South Shields where he was in charge until leaving the club earlier this year.
During his playing career Fenton played for Premier League sides such as Aston Villa, Blackburn Rovers and Leicester City. His spell at Spartans included a pivotasl role in winning promotion to the National League North in 2006.
Upon his appointment, Fenton said, “I’m excited and looking forward to getting going. I had a really good seven years here last time and I’m looking forward to seeing some familiar faces.
“I’m looking forward to the challenge. The supporters are fantastic, and hopefully we can repay them with some good results.”
Chairman Tony Platten added, “It goes without saying that I am delighted that we have secured the services of Graham Fenton to manage the Club. We received over 70 applications but Graham’s was the standout applicant in all areas.”
Predecessor Mitchell left the club just one game into the start of the new season, a 1-0 home defeat at the hands of Kidderminster Harriers.
In a statement he said: “It’s been an absolute honour to manage Blyth Spartans. I’ve enjoyed every minute of it and want to thank everyone behind the scenes.
"The fans have been absolutely top drawer. From the minute I walked in. They’re fantastic supporters, through thick and thin they stick with the team, and I just want to say a massive thank you.”