The 41-year-old, who abruptly quit international cricket following the Cricket World Cup in the Caribbean in 2007, is one of 21 players who have been selected in the elite class of players.
Lara is joined by big-hitting West Indies opener Chris Gayle in the top tier, but are the only two West Indians making the grade.
“I would like to see myself as someone who can make a contribution even if I’m not in the final XI,” Lara was quoted as saying.
“I would like to get involved in a holistic way and not just as a player,” he added.
Lara gave his strongest signal of a return to competitive cricket when he turned out for Masvingo Rocks in the Stanbic Twenty/20 Series in Zimbabwe last month.
With his star appeal, the left-hander is now expected to be one of the hottest commodities at the IPL auction which takes place in Bangalore on 8-9 January.
He will bring with him a sterling career that yielded 11,953 Test runs and 10,405 runs in One-Day Internationals.
Indians Rahul Dravid, Yuvraj Singh and Anil Kumble have all attracted the highest reserve as price as well, along with retired Australian Test and ODI star Adam Gilchrist and stylish Sri Lankan batsman Mahela Jayawardene.
West Indies all-rounder Kieron Pollard, who will turn out for last season’s defeated finalists Mumbai Indians, will not be involved in the auction as he was one of only 12 players retained by the respective franchises earlier this month.