The 22-year-old Burnley midfielder, who was on loan at the Shrimps earlier this year, links up again with Clarets team-mate Ryan Cooney who has also rejoined the club.
After joining Morecambe in January, Phillips made 11 appearances for the club, scoring three times in his first four matches and four goals overall, though his last outing yielded a red card against Crewe Alexandra at the end of February.
He is the eighth new face at the club this summer as boss Derek Adams moulds his squad for the 2020/21 season.
Adams said: “Adam came in last season and scored some important goals for us.
“He can play a sitting role or attacking role in central midfield where he did really well for us and we're looking for him to add to his goal tally for us this season.
“I'm delighted to get Adam and Ryan (Cooney) back with us and it gives us good competition for places all over the squad.
“It’s up to them now to get into the starting line-up.”