The adverts, which the discount store have described as the Advertising Standards Authorities "worst nightmare" will appear on social media from December 1.
Last year, the X-rated campaign was so controversial that it got banned by the ASA.
Each day of December, the retailer positioned its elf in naughty positions with graphic illustrations.
The festive character was shown playing strip poker and fighting Darth Vader with a dildo.
One poster pictured the Elf pictured standing over a female doll near a Twinings tea box and asking: "How do you like your tea? One lump or two?"
Other pictures showed the elf drawing a cactus that looked suspiciously like a man's penis, and riding a cuddly toy donkey with the caption: "Don't tell Rudolph I've found a new piece of ass."
The campaign angered several companies including Twinings and Elf on the Shelf.
It also provoked a Twitter storm among consumers who weren't impressed by the images.
The campaign famously only cost Poundland £25 last year, but the discounter said it had tripled its budget this year.
Poundland said bosses had agreed to increase significantly the risk of offending snowflakes and will introduce a second, female elf character – Elvie.
The female elf has been described as a "new friend with all sorts of benefits"
Poundland said: "After the controversy of its infamous inaugural elf campaign in 2017, Elfie was released from Wormwood Scrubbers earlier this week after thousands of fans signed the petition for his right to freedom.
"Despite undergoing Anti Smut Alleviation (ASA) therapy while banged up, it remains to be seen whether Poundland’s Elf will emerge a reformed character and take what may well be the last chance to redeem himself.
"Confirmation that Elfie will return with a dramatically increased budget will strike fear into some of Britain’s struggling retailers, who’ve already splashed the cash on big name stars like Elton John and Take That this Christmas."
Poundland has hinted Elfie and Elvie may make a joint appearance when posh retail rivals release their budget-busting, tear-jerking Christmas TV ads next month.
“I know I’m not everyone’s cup-of-tea-bagging, but you just watch how I can bring a tear to the nation’s eyes,” said Elfie cryptically.
The ASA banned a number of the 2017 images, ruling that the campaign was too offensive.
But Poundland says the campaign resulted in 33m impressions, 4m engagements and 43k new fans on social media.
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