We have every faith in Steve Cotterill to help us achieve the ambitions we all share.Xuandong Ren, Blues CEO and Director
Cotterill has agreed a two-and-a-half year contract.
Lee Carsley will be Cotterill's Assistant Manager.
First Team Coach Paul Groves and Goalkeeper Coach Kevin Hitchcock will also stay and form the rest of Cotterill’s backroom staff.
After a comprehensive and thorough process the Club identified Cotterill as the right man to move Blues forward.
Cotterill, 53, will formally take charge of team affairs on Monday.
Carsley, who stepped in as Caretaker Manager after the sacking of Harry Redknapp, will lead the side on Saturday for the Sky Bet Championship match at Hull City after having overseen preparations this week for the fixture.
Cotterill, as Assistant Manager, was a significant influence in helping plot Blues safety last season when coming in with three games to go as the threat of relegation loomed.
He opted to leave St. Andrew’s in the summer as he wanted to be a number one in his own right, and parted on good terms with the Club.
Xuandong Ren, Blues CEO and Director, said: “A lot of quality candidates applied for the Manager position and we underwent a very, very careful and meticulous process of selection.
"We have every faith in Steve Cotterill to help us achieve the ambitions we all share.
"We are also delighted that Lee Carsley will be Steve's Assistant Manager and, with the rest of the management team, we are excited about the future prospects, we are sure they can do a great job."
Former Cheltenham Town, Burton Albion, Wimbledon and Bournemouth player Cotterill has a wealth of managerial experience.
A five-year spell in his first English job at home-town club Cheltenham yielded three promotions and the FA Trophy.
He managed Stoke City and after spell at Burnley, Cotterill guided a Notts County side that had been in disarray to the League Two title.
A move to Portsmouth followed and following a short reign at Nottingham Forest, he took Bristol City to the 2014-15 League One title, with a record 99 points, and won the Football League Trophy at Wembley.
Paul Williams, who Carsley brought in to assist as First Team Coach, will depart Blues with the Club's thanks and best wishes after Saturday's game.