Armstrong, who made his Newcastle debut in 2014 at the age of 17 to become the club's second youngest Premier League player, has signed a four-year contract with Blackburn that promises to keep him in Lancashire until the summer of 2022.
The deal is believed to be worth an initial £1.75m rising to £3m.
After previously being handed the number 18 shirt during his loan spell, he will don the number seven shirt for Blackburn this season last worn by Liam Feeney.
In returning to Blackburn, Armstrong will link up once more with manager Tony Mowbray having enjoyed a very strong loan spell at Coventry City in League One under the boss earlier in his career.
A statement from Newcastle has wished the player well for the future.