Waugh has been out since he injured ligaments in his right ankle in February's round three match against the Cheetahs in Bloemfontein, and has been forced to endure a frustrating time on the sidelines while the Waratahs have slumped to their worst season on record.
"To say I'm keen to play is an understatement," said Waugh, who will regain the captaincy this weekend.
"It's been extremely frustrating sitting on the sidelines and hopefully I can make a worthy contribution to what is going to be a huge game given that it's Tana Umaga's farewell appearance.
"He's a player respected by his team-mates and opposition alike and I�m glad to be part of it."
Halfbacks Josh Valentine (knee) and Brett Sheehan (rib) are also fit to play with Valentine to start and Sheehan on the bench meaning the eye-catching Josh Holmes, who has played No 9 for the last two games, has played his last match for NSW before heading to the Brumbies next year.
"In a word, experience, that's what we've gone for," Waratahs head coach McKenzie said of his selection process.
"This is an important game for us, we want to win it and we've picked our most experienced line-up as a result."
In other changes, Benn Robinson starts at prop ahead of Matt Dunning while fullback Peter Hewat will celebrate his 50th match for NSW this weekend.