Gattuso replaces Luciano Spalletti, who was fired last week after Italy lost their opening qualifier 3-0 at Norway to spark fears that the four-time champions will fail to qualify for a third straight World Cup.
Gattuso lifted one of those World Cups as a player, back in 2006.
"Gattuso is a symbol of Italian soccer, the blue shirt is like a second skin for him," Italian soccer federation president Gabriele Gravina said.
"His motivation, his professionalism and his experience will be fundamental to best face the national team's next matches.
"Aware of the importance of the objective we want to achieve, I thank him for the willingness and total dedication with which he accepted this challenge."
Claudio Ranieri was the Italian soccer federation's top choice to replace Spalletti but he turned down the offer.
Gattuso's last coaching job was at Hajduk Split but he left the Croatian club by mutual consent at the start of the month after just one season in charge.
The 47-year-old had previously coached AC Milan, Napoli, Valencia and Marseille, among others.
As a player, Gattuso also won two league titles and two Champions League trophies with Milan, where he made 468 appearances and scored 11 goals.
His only goal in 73 appearances for Italy was a fierce 25-metre strike against England in a 1-0 win in November 2000.
But Gattuso's only trophy as a coach was the Italian Cup with Napoli in 2010.
Italy are already nine points behind Norway in their World Cup qualifying group, albeit having played two matches fewer than the group leader.
The Azzurri followed up that dismal opening loss with a 2-0 win over minnows Moldova last Monday in what was Spalletti's final match in charge. He had revealed that he was being fired the previous day.
Gattuso's first match as Italy coach will be at home to Estonia on September 5. Israel are also in five-team group I.
Italy host Norway in the final round on November 16. Only the group winners advance directly to the 2026 tournament co-hosted by the United States, Canada and Mexico. The runners-up enter playoff brackets to be played next March.
That was the stage in which Italy were eliminated by Sweden and North Macedonia and ruled out of the 2018 and 2022 World Cups, respectively.
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