Edinburgh will play their home matches at Myreside for the second half of next season.
The Pro12 side are to switch from Murrayfield from January to May with a view to playing the 2017-18 campaign at the George Watson's College ground.
Myreside's capacity is to be increased to around 6,000 with temporary stands.
Edinburgh used the venue in the early years of professionalism and last played a match there during the 2015 Six Nations.
"This is about building a strong future for the club at a home ground in the city that better suits our needs and improves the match day experience for fans and players alike," said Edinburgh managing director Jonny Petrie.
Work will now start on bringing the facilities at the home of Premiership club Watsonians up to pro-level standards.
|Capital nomads - Edinburgh's 'home'|
|1996 - 1998 - Myreside|
|1998 - 1999 - Easter Road|
|1999 - 2002 - Myreside|
|2002 - 2004 - Meadowbank|
|2004 - 2016 - Murrayfield|
Edinburgh have been playing at Murrayfield since 2004, with room for 67,500 spectators at the national stadium.
"Having a smaller venue, with the crowds we are getting just now - and being able to grow that, will be much better for us," Petrie told BBC Scotland.
"That's been a challenge at Murrayfield when sometimes the crowd gets lost.
"We'll have a home venue the players can really indentify with, they can become closer to the supporters, and it becomes a more intimidating place for teams to come as well."
Edinburgh will have the option of returning to Murrayfield for bigger matches, such as the 1872 Cup encounters with Glasgow Warriors.
Alan Solomons' side finished a disappointing ninth in the Pro12, having won just three out of 10 matches since their back-to-back successes against defending champions Warriors over the festive season.
"The season has been frustrating in many respects," admitted Petrie. "We've ended up behind where we hoped we would.
"But we've been investing in the squad and we're comfortable with where we are going."
Edinburgh 'should have at least 10,000 supporters'
Former Watsonians and Scotland centre Scott Hastings hailed the move as "innovative", and believes Myreside could develop into an Edinburgh stronghold in years to come.
"At Murrayfield, Edinburgh were rattling round in a huge stadium," he told BBC Scotland. "For me, the beauty of Edinburgh rugby is it's all about passion, all about creating an atmosphere.
"Ultimately, it's up to the players to respond by playing attractive, dynamic rugby, but also for the crowd to get behind the team and to be more intimate and vocal within creating an atmosphere.
"It's a stepping stone process. The pipeline dream is to have a 3G pitch in there so there's not any debate over the surface. The floodlights need a little bit of improvement; the facilities certainly need an overhaul.
"I've commentated across European and world rugby, and really Edinburgh should be punching at least a minimum of 10,000 supporters. You just have to look at our neighbours in the Pro12, someone like Ulster, who play at an 18,000-seater stadium. Ultimately, I think that will be Edinburgh's objective, but this is the stepping stone process to get them there."