Zola has been appointed at St Andrew's just 24 hours after the second-tier team sacked previous manager Gary Rowett.
Zola has been appointed at St Andrew's just 24 hours after the second-tier team's new Asian owners sacked previous manager Gary Rowett.
The 50-year-old, widely regarded as one of Chelsea's all-time great players, returns to the dug-out after previous spells in charge of West Ham and Watford.
"We are delighted to welcome Gianfranco and his backroom team to the club," Birmingham director Panos Pavlakis said.
"His pedigree, philosophy and ambition fits with what we would like to achieve as we move in a new direction.
"Gianfranco has a wealth of top-level experience as both manager and player and we are extremely excited about his appointment."
Rowett was surprisingly axed despite leading Birmingham to seventh place in the Championship as Paul Suen, the frontman for the investors who took over in October, starts to make his presence felt at a club with a rich history but a flawed recent past.
Zola, whose reign starts against promotion rivals Brighton on Saturday, has signed a two and a half year contract and will be expected to lead Birmingham into the Premier League.
His former Chelsea team-mate Pierluigi Casiraghi joins him at Birmingham as first-team coach, with another ex-Chelsea team-mate Kevin Hitchcock hired as goalkeeping coach.
The Italian has mixed managerial pedigree, having been sacked in June after just one season in charge of Qatari side Al-Arabi.
He was dismissed by West Ham in 2010 after an underwhelming spell in his first job as a manager.
Zola's Watford were beaten by Crystal Palace in the 2013 Championship play-off final and he left the Hornets midway through the following season.
He was also sacked by Serie A side Cagliari after just 10 matches in charge in 2015 after failing to lift them out of the relegation zone.