James, who rose to fame as cheeky chappy Rory 'Finn' Finnigan in the Channel 4 soap, will now star as Ruby Haswell's ex-boyfriend, Seb.
"Having taken a five year break from acting to concentrate on stand-up comedy I am really looking forward to getting back on the horse," said James. "It will be great to join the cast of Emmerdale and Seb will be my first time playing a northerner!"
When Seb makes an surprise appearance in the Yorkshire village, he brings with him secrets from Ruby's past that she had tried to forget.
While Ruby's struggles with mounting debt and unsuccessful attempts to become pregnant with her partner Ali, she takes on a job as a carer for an elderly man called William, whose son happens to be her ex Seb.
Taking on the character of William is another much-loved former soap star, Dudley Sutton.
Dudley, whose TV credits include EastEnders, Porridge and Lovejoy, said it was "great" to be joining the show.
"This will be my second appearance in Emmerdale as I appeared in 1997 as a tramp!" said Dudley. "It's great to be back in Yorkshire and I have fond memories of filming the Beiderbecke trilogy in the same building as Emmerdale is now filmed."
Dudley most recently starred in TV series Family Tree, while James made a brief return to Hollyoaks in 2013 when he reprised his role to star in the show's spin-off, Hollyoaks Later.
Upon hearing that his character's old friend Tony Hutchinson had cancer, Finn returned to help Tony get the most out of his life.