The 31-year-old is serving a one-year suspension after being involved in a ball-tampering scandal during the Test series in South Africa in March.
Bancroft was due to be playing for Somerset, but the county cancelled his contract following the Cape Town fiasco - which also resulted in Steve Smith and David Warner being given one-year bans.
Notably, Warner has been banned from worldwide cricket for 12 months by Cricket Australia.
David Warner would replace his compatriot D'Arcy Short in the St Lucia side. Apart from worldwide cricket, the trio is also disallowed from competing in top-grade domestic cricket in Australia, but remain free to play in overseas leagues. "He is going to add a lot of value on the field and in the dressing room as we pursue our first Hero CPL Title", said Mohammad Khan the General Manager of Stars.
Earlier this month, the southpaw was confirmed to be a part of the Winnipeg Hawks in the soon-to-begin Global T20 Canada League.
Following the Canadian league, Warner, along with Bancroft, will play in Darwin's limited-overs Strike League. He will play for St. Lucia Stars in the league beginning from 8 August.
Warner has played in T20 tournaments around the world including the IPL and the Aussie Big Bash, but this will be his first appearance in the CPL.
The month-long CPL will also feature other Australians like all-rounder Shane Watson and Chris Lynn.