Ancelotti was on Tuesday morning named as the successor to Jose Mourinho at Real Madrid and, minutes later, PSG confirmed Blanc, who has been in talks with the club since last week, as his replacement in the French capital.
A club statement read: "Paris St Germain is delighted to announce the appointment of Laurent Blanc as coach for the next two years. He will take charge of the squad on 1 July 2013 for the start of pre-season training."
Ancelotti led PSG to the Ligue 1 title last term and Blanc, who achieved the same feat with Bordeaux in 2009, has been tasked with bringing further success to the club.
PSG also reached last season's Champions League quarter-final, losing on away goals to Barcelona.
And their statement on Tuesday continued: "The board of Paris St Germain has given Laurent Blanc the mission to build on last season and to continue the club's ascendancy towards the summits of the European game."
Blanc, 47, also lifted the Coupe de la Ligue and was named Ligue 1 manager of the year in Bordeaux's successful 2009 campaign before leading France into Euro 2012, where they suffered a quarter-final exit.
A distinguished career as a central defender was crowned by his key role in the France side which won back-to-back major trophies at their home World Cup in 1998 and Euro 2000, eventually retiring with 97 caps and an impressive 16 international goals to his name.
He also collected league titles in France with Auxerre and in England with Manchester United, the European Cup Winners' Cup with Barcelona and domestic cup competitions with Montpellier, Auxerre and Barca.