Shipperd took charge of the Blues on an interim basis when Phil Jaques was axed as head coach last November.
The 66-year-old has now been handed a permanent role with NSW and will hope to get the Blues heading in the right direction.
Shipperd - once dubbed the "Wayne Bennett of cricket" by former Australia allrounder Dan Christian - led Victoria to four Sheffield Shield titles in a 12-year association with the Vics, before being appointed Sydney Sixers coach in August 2015.
He led the Sixers to consecutive BBL titles in 2019-20 and 2020-21 and will remain in that role as he attempts to turn NSW around in all formats.
"I have enjoyed immensely my involvement with NSW cricket over the past eight seasons," Shipperd said in a statement on Sunday.Â
"I feel I can make a contribution to this current playing group as they embark on an exciting future.
"The NSW cricket system remains strong and enjoys a storied history of excellence.
"I am drawn to providing my experiences to meet the expectations of that history."
The Blues' struggles in the Sheffield Shield were mirrored in the 50-over format, in which they won just two one-day games last season.
"Greg's record as a senior coach speaks for itself, his passion for delivering success for NSW is evident," Cricket NSW performance boss Greg Mail said.
"We discussed the role with a number of highly credentialed domestic and international coaches, and it quickly became apparent Greg was the right person to lead us forward.
"I'm looking forward to building the coaching team around Greg and working closely with him.
"No one here is happy with our recent performances, and we are determined to do what it takes to improve."
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