Phelps will join long-time Subway pitchman Jared Fogle in a prime-time television spot titled 'Be Yourself', created by MMB, an independent agency out of Boston.
The Subway campaign follows Phelps' multi-year sponsorship deal with H20 Audio -- a manufacturer of mp3 player headphones which can be worn underwater, which was finalised last month.
In January, Phelps' endorsement potential looked dead in the water after the News of the World released photos of the eight-time Beijing gold medallist smoking out of a glass pipe.
Scared off by the controversy, Kellogg's quickly dropped the swimmer's mug from its cereal boxes, calling his behaviour "not consistent" with its image.
Subway, on the other hand, decided to stand by its man, and in a statement said: "Like most Americans, and like Michael Phelps himself, we were disappointed in his behaviour.
"Also like most Americans, we accept his apology. Moving forward, he remains in our plans."
It is understood that Subway was planning on breaking the television campaign near the time the News of the World leaked the photos, but decided to bide its time and let the controversy wind down until this summer.
Other sponsors, including Speedo, Omega, Visa and Pure Sports, were quick to express support for the Olympic champion, but Subway waited a week to give its verdict on his behaviour.
Tony Pace, Subway's chief marketing officer, said Phelps "is one of the world's most famous fans of Subway" and the new television commercial demonstrates "how everyone from world champions to everyday people can have their sandwiches made to their specific tastes".
The campaign breaks July 5 in the US.