Sharp, 21, moved to Glanford Park from the Blades for £100,000 in August 2005, and bagged 32 goals last season to help the Iron win promotion to the Championship.
The deal will see Blades youngster Jonathan Forte move the other way.
Sharp had also been interesting Norwich, Wolves and his former boss Brian Laws at Sheffield Wednesday, but has elected to return to the club he supported as a youngster.
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