Better known for his hit Channel 4 comedy series 'Phoenix Nights' and sell-out tour 'Top of the Tower', Kay will star as the "cold and powerful" character Victor Kennedy.
It marks the comedian's first return to "serious acting" since he appeared in the Paul Abbott TV series' 'Butterfly Collectors' and 'The Secret Life of Michael Fry' in 2000.
Kay landed the role in 'Doctor Who' after writing a fan letter to its writer Russell T Davies. He follows other comedians such as Simon Pegg, who appeared in the first series.
Other guest stars who have agreed to appear in the second series include: Maureen Lipman, the former face of BT ads; 'Shirley Valentine' actress Pauline Collins; and 'EastEnders' star Tracy-Ann Oberman.
Kay will appear in episode 10 of the BBC One series, which returns to Saturday nights later this spring.
'Casanova' star David Tennant, who took over as the 10th Time Lord at the end of the last series, and Billie Piper, are back playing the show's leads.
Davis said: "We are delighted to welcome Peter onboard the Tardis."
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