Shepard, 43, will reportedly play a former soldier named Luke Matthews, who returns to Garrison, Colorado, with some connection to the Iron River Ranch, and becomes quick friends with Colt (Ashton Kutcher) and Beau (Sam Elliott). However, his past soon catches up with him.
Shepard's story arc is set to take place over the second half of the show's 20-episode third season.
In December, a Netflix spokesperson revealed that Masterson -- one of the show's original cast members -- had been written out of the show after reports broke last March that Masterson was being investigated by the Los Angeles Police Department over multiple sexual assault allegations stemming from the early 2000s. Masterson has denied the allegations against him.
"As a result of ongoing discussions, Netflix and the producers have written Danny Masterson out of The Ranch," the spokesperson said in a statement released to ET. "Production will resume in early 2018 without him."
Masterson later released a statement to The Huffington Post, calling the allegations against him "outrageous," and expressing his disappointment over Netflix's decision to remove him from the series.
"From day one, I have denied the outrageous allegations against me. I have never been charged with a crime, let alone convicted of one. In this country, you are presumed innocent until proven guilty. However, in the current climate, it seems as if you are presumed guilty the moment you are accused," the 41-year-old actor stated. "I understand and look forward to clearing my name once and for all."