The England Under-21 international has put pen to paper on a deal which will keep him at Villa Park until the summer of 2012.

The 22-year-old could come into contention to play for Martin O’Neill’s side against Liverpool at Villa Park on Sunday.

Milner spent the entire 2005-06 campaign on loan at Villa, and a permanent deal was set to go through in August 2006.

But Newcastle pulled out of the deal at the 11th hour after failing at that stage to sign Mark Viduka.

Milner signed a new four-year contract last summer with the Magpies, but last week handed in a transfer request.

Milner becomes O’Neill’s seventh signing of the summer and will further bolster the squad after they booked a place in the first round of the UEFA Cup for the first time in seven years.