Koeman succeeds Dick Advocaat, who failed to guide the Netherlands to the 2018 World Cup after succeeding Danny Blind midway through the qualification campaign.
"Koeman has just signed a contract that connects him to Orange with immediate effect up to and including the World Cup 2022".
He succeeds Dick Advocaat, who stepped down after the team's failure to reach this summer's finals in Russian Federation.
They also missed out on the European Championships in France in 2016.
The 54-year-old becomes the fourth coach to take the Holland job since Louis van Gaal left to take over at Manchester United after guiding the Oranje to third place at 2014 World Cup Brazil.
He said: "I am proud to finally announce that I am the new manager of the Dutch national team".More news: China slams U.S. nuke review
We honestly wish them the best.
"If you know how I work with my teams, I am a coach who likes to change systems".
"We know we don't have the best players, but that doesn't mean that you cannot have the best team", he added.
Koeman, who won 78 caps and scored 14 goals as a player from 1982 to 1994, served as Guus Hiddink's assistant with the Dutch national team at the 1998 World Cup.
The former Everton manager's first opponents will be England in a friendly at the Johan Cruyff Arena in Amsterdam on 23rd March.
The younger brother of former global team-mate Erwin Koeman, and the son of ex-Dutch worldwide Martin Koeman, he made his debut at 17 playing for FC Groningen in 1980.