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Seven-times Formula 1 world champion Michael Schumacher will come out of retirement to race for Mercedes next year, BBC Sport understands.

The German, who will be 41 on 3 January, has signed a contract and the deal will be announced imminently.

Schumacher will partner compatriot Nico Rosberg in the team that won the drivers' and constructors' titles in 2009 in its former guise as Brawn.

His spokeswoman Sabine Kehm said she could not make any comment.

The German newspaper Bild is reporting that Schumacher signed a one-year deal and it is likely he will have the option to continue beyond 2010 if his returns goes well.

Schumacher will reportedly earn £6.2m after signing up to reunite with Mercedes team principal Ross Brawn, who masterminded all seven of his titles, the first two with Benetton in 1994-5 and the subsequent five with Ferrari from 2000-4.

Mercedes are known to want German rising star Sebastian Vettel in the long term, but the 22-year-old is contracted to Red Bull until the end of 2012.

Rosberg, who signed for Mercedes shortly after the season ended, has already warned Schumacher he faces a tough task getting back up to speed with F1 but said he would welcome him as a team-mate.

"It will not be easy for him," Rosberg was quoted in German newspaper Stuttgarter Zeitung.

"When you stay away from F1 for a long time, it takes time to get used to all the test sessions again. It's not simple.

"I have no idea if it (a comeback) is true or not, but if he did join that would be an absolutely fantastic move."

Schumacher was forced to call off a planned temporary comeback as a stand-in for injured Ferrari driver Felipe Massa last season because of a neck injury sustained in a motorcycle accident last February.

But Schumacher is known to have had medical checks recently and it must be assumed he has been given the all clear as he would not want to face the same embarrassment again.

He signed a revised contract as a consultant for Ferrari, but he told Ferrari president Luca di Montezemolo that he was "very close" to concluding a deal to race for Mercedes.

Ferrari have had to release him from his contract to enable him to race for Mercedes.

His comeback is the most high profile in F1 since Austrian Niki Lauda came out of a two-year retirement for the 1982 season to race for McLaren.

Lauda, who was 33 at the time, went on to win a third world title in 1984.

Juan Manuel Fangio is Formula 1's oldest world champion, the Argentine won a fifth world championship at the age of 46 before retiring.

Schumacher has been training hard in preparation for a return and, assuming his neck is fully healed, is not expected to have any problems with fitness.

His former team-mate Eddie Irvine told the BBC last week that he expected Schumacher would win races, even though he would not be as powerful a force as before.

"The speed will be there, though he won't be as fast as he was seven years ago," Irvine said.

"He's not at the peak of his game, but he's still good enough to win races as he has such an immense talent. It's still four wheels, a steering wheel and an engine and there's never been anyone better than Michael."

Irvine said he thought Schumacher would be at a disadvantage in wheel-to-wheel racing compared to the younger generation of drivers such as 2008 world champion Lewis Hamilton.

"Lewis isn't going to back off, but Michael will have to because he'll be 41," Irvine said.

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