St Luke's won the account, which will be run out of London, following a competitive pitch against a number of undisclosed agencies.
St Luke's was added to Ikea's roster following a pitch at the beginning of 2004, but it will now be charged with developing a multimedia campaign for the German market to promote the retailer's latest range of bedroom, kitchen and garden furniture.
The ads, which are scheduled to break later this year, will be backed with a budget of £17 million. Media planning and buying will be handled by MediaCom.
Phil Teer, the joint managing director of St Luke's, said: "It's great to be working with Ikea again and it's a great boost for the start of the year."
In the UK, Karmarama is the agency of record on the Ikea account. St Luke's held the business in the UK from 1995 to 2001.
Ikea attracted more than 300 million customers last year. It commands a 20 per cent market share in its home country, with sales in Germany accounting for one-fifth of its total turnover.