Michael Schumacher targeted an unprecedented eighth Formula One title after Mercedes announced on Wednesday he was coming out of retirement to race for them at the age of 41.

"Our aim can only be to fight for the championship," the German told reporters in a conference call after signing a contract on Tuesday.

Media reports have suggested the German, who won his titles with Benetton and Ferrari and retired at the end of 2006, will earn 7 million euros ($10 million) in what would be an all-German line-up.

"We are talking about a three-year deal, it's not just a one-off thing," said the former Ferrari ace of a contract that had been expected to be for just one year. "We are looking for continuation."

Mercedes, who have taken over champions Brawn GP, have signed Nico Rosberg as their other driver for 2010. World champion Jenson Button has left the British-based team for McLaren.

A move to Mercedes will give Schumacher, who turns 41 in January, a potentially winning car and reunite him with Britain's Ross Brawn -- the technical director who guided him to all his titles and who is now the team principal.

It will also take Schumacher's career full circle, since the German drove for the Mercedes sportscar team before breaking into Formula One with Jordan in 1991.

"I am happy to be able to give something back that Mercedes gave in the early days," Schumacher said.

Schumacher had planned a comeback with Ferrari earlier this year as a stand-in for injured Brazilian Felipe Massa but had to abandon that idea due to a neck injury caused by a motorcycle accident.

Since his retirement the German has worked as a consultant for Ferrari, but the Italian team has said that is not a binding agreement.

Schumacher will be returning to a very different, and more cost-conscious, Formula One from the series he left after a record 91 wins from 249 starts.

Mercedes and Ferrari will be the only fully manufacturer-owned teams, with BMW, Honda and Toyota having all left in the past year and Renault due to sell a significant stake in their British-based operation.

Schumacher will be hoping to emulate the likes of Austrian Niki Lauda and France's Alain Prost, champions who both came back to win titles after time out of Formula One.

Former champions Damon Hill, Schumacher's leading rival in the mid 1990s, and Nigel Mansell have both said that age will be no impediment and that the German could return as a winner.

"It wouldn't surprise me if Michael challenged for another world championship," Britain's 1992 champion Mansell, who won his title aged 39 and competed in Formula One until the age of 41, said at the weekend.

Schumacher's return will allow 2008 champion Lewis Hamilton, who entered the sport only after Schumacher retired, to measure himself against Formula One's most successful driver while also setting up an intriguing Anglo-German battle.

Hamilton and 2009 champion and compatriot Button will form an all-English pairing at rivals McLaren, who will still be powered by Mercedes engines.

There will also be a battle of the generations, with Schumacher lining up on a starting grid likely to include at least one driver half his age.

The sport's oldest champion remains the late Argentine Juan Manuel Fangio, who took his fifth title at the age of 46. The oldest driver to win a Grand Prix is Italian Luigi Fagioli in 1951 at the age of 53.