The Italian has signed a contract until June 2018 to take over from Frank de Boer.
Taken over in June by new Chinese owners, Inter are struggling badly this season and are sitting ninth in Serie A and last in their Europa League group after a disastrous start to the campaign.
The 51-year-old Pioli faces a fiery start to his reign -- a local derby at city rivals AC Milan on November 20.
The Italian has signed a contract until June 2018 to take over from de Boer, who was sacked a week ago following a 1-0 defeat at Sampdoria, Inter's fifth loss in 11 outings.
Pioli is vastly experienced, having previously coached an array of Italian clubs including Parma, Sassuolo, Bologna and Lazio, leading the latter to third place in Serie A in 2015, before being fired in the middle of last season.
Since de Boer's departure youth team coach Stefano Vecchi has overseen a 2-1 Europa League loss at Southampton and a hard-fought win over tailenders Crotone in Serie A.
New Chinese owners Suning appointed de Boer as a replacement for Roberto Mancini two weeks before the start of the Serie A season, tasked with restoring Inter's dented reputation at home and in Europe.
That burden now lies with Pioli, a former defender who played for various Italian teams, including Juventus and Fiorentina, before hanging up his boots and taking up football management.
Inter have not won the Italian title since Jose Mourinho guided them to the Scudetto in 2009-2010, the same season they also won the Champions League.
Former Paris Saint-Germain coach Laurent Blanc was linked with the vacancy following de Boer's exit, but several players said there had been communication problems with the Dutchman and voiced preference for an Italian.
After the win over Crotone, Inter captain Mauro Icardi said: "It is better if it's an Italian who takes over because he will know the Italian championship.
"We are nearly at Christmas already and there is no time to lose. Champions League qualification is still the aim."