Ellison returns to the team after competing in the 2012 MotoGP World Championship.
The 32-year-old Lancastrian finished runner-up in 2009 and was in contention for the title in 2010 before a crash left him sidelined with a broken femur.
Waters, 25, is set to make his debut in the British Championship after securing his second Australian title this season.
Ellison said: “I am really happy to be part of this team and the championship again as I feel that I still have unfinished business. I have seen how the championship has unfolded this year and I am really looking forward to coming back.
"The level of competition is definitely very high and you could see that from last season, but I know this is a strong team who are hugely capable and share the same goals. I am now looking forward to testing the Milwaukee Yamaha as the technical rules have changed since I last raced in BSB, which should suit me better as I prefer riding without traction control.
"I know I achieved a lot this year and now I am returning focused and confident about 2013. In 2009 I was second in the championship and I then joined SMR and we would have been fighting for the title if it hadn’t been for injury so I know that together we have the ability to put the Milwaukee Yamaha at the front; I am certainly not coming back to just make up the numbers.”
- Sports & Recreation