The Islington-born custodian returns to Kenilworth Road to act as cover for number one Robert Beckwith, having enjoyed a previous spell with The Hatters between 1995 and 2001.
Beckwith is suspended for Saturday's home clash with Wycombe Wanderers and with Newell facing the prospect of playing 17-year-old Dean Brill in goal, he has decided instead to bring in some custodial experience in the form of Abbey.
Since leaving Luton, Abbey has had spells at Chesterfield and Northampton Town, where he was eventually released by The Sixfields Stadium outfit at the end of last season.
He trained with The Hatters in the summer before making a brief move to Conference club Stevenage Borough, where he made six starts for the Broadhall Way club before returning to Bedfordshire to sign with Luton again.
Abbey was pleased to return to The Hatters and continue his career with a club that he has spent much of his playing time with.
"It's strange how football work outs," Abbey told Luton's official website.
"It's good to be back, I was here towards the end of last season and through the summer.
"I've been about the club on a daily basis during that time and it's not changed that much since I left.
"It's been a really frustrating time for me over the last couple of years, especially after the year before the last one because I had a really good season and I wanted to kick on from there and it sort of held me back which was disappointing but you can only look forward."
