Caddy, who turns 20 later this month, enjoyed a breakout season at the Suns, playing all 22 games after managing just two last year.
His efforts saw him earn a Rising Star nomination in Round 16 and he will be highly sought out by a number of Victorian clubs.
Essendon appear to be the frontrunners after Caddy nominated them as his club of choice last year, but St Kilda, Geelong and Carlton are also reportedly in the hunt.
"It has been a very difficult decision to make and I would like to thank the players, coaches, staff and fans for their support and understanding of not only my decision to return home but throughout my time with the Suns. I will be forever grateful for the opportunities I received with the Gold Coast Football Club," he said.
"It was a tough decision to make as I have many great mates at the Suns and know that the club is on the right path to future success. I do though believe the move back to Melbourne is the right thing for me."
Suns General Manager of Football Operations Marcus Ashcroft credited Caddy for his professionalism over the last 12 months and said the club will now facilitate him in ensuring a fair deal takes place during the trade period.
"We are disappointed with Josh's decision, however we appreciate the transparency and professionalism Josh has displayed whilst making this extremely difficult decision," he said.
"We will now commence the process with Josh's manager to find an alternate home for Josh. Both Josh and his manager understand that it will be the clubs intention to facilitate an exchange that will deliver the most favourable outcome for the advancement of our playing group going forward."