The 33-year-old was a free agent after being released by Gillingham in the summer, whom he moved to from the Iron six years ago.
He lead Scunthorpe to promotion via the Division Three play-offs in 1999, and made an emotional farewell the following season following United's relegation back to the basement division.
Rushden boss Paul Hart said: 'He is a gutsy battler who shows great leadership.
'His integrity and honesty is a terrific example, and he is the perfect role model for our younger players. His experience will be of great benefit.'