On 19 December 2011 he agreed to return to Palermo, replacing Devis Mangia as head coach of the Serie A club from Sicily. In his first game in charge of the club, he achieved a 2–2 draw against bottom-table strugglers Novara, which was followed by a 1–3 home defeat at the hands of Napoli. After a disappointing start, results improved in January also thanks to winter signings such as Emiliano Viviano, Franco Vázquez and Massimo Donati (the latter being team captain during his previous period at Bari), leading to a string of four consecutive home wins and a 4–4 away draw at San Siro against Inter that brought Palermo back into the fight for a UEFA Europa League spot. Palermo finished in 16th in the 2011–12 season and he was released six months after taking over as head coach.