Martin will replace Bruce Anstey in the team, who won last year's race.
McGuinness had been on his way to a third straight victory before suffering a technical issue, and eventually finished fourth.
The team said the duo, who will also be team-mates at Honda at the TT races, will target the first 120+mph lap.
McGuinness still holds the lap record for the class of 119.279mph (18:58.743), which he set on way to victory in 2015.
Martin, from Grimsby, missed last year's TT and North West 200 to compete in the 2,712-mile Tour Divide mountain bike race in the United States.
The 35-year-old has not raced since suffering multiple broken vertebrae and a fractured sternum in a crash in the Dundrod 150 Superbike race in 2015.
The truck mechanic and TV personality is still looking for his first TT victory, having finished on the podium 16 times.
Guy Martin and John McGuinness will race for the Japanese-based Mugen team in this year's TT race for electric-powered machines.