The 62-year-old replaces Javier Aguirre, who was sacked last month amid fears that Japan’s hopes of qualifying for the 2018 World Cup could be hindered by the Mexican’s involvement in a match-fixing investigation in Spain.
Halilhodzic has not coached since November after leaving Turkish side Trabzonspor.
Japan face Tunisia and Uzbekistan in friendlies later this month before June’s World Cup qualifying campaign begins.
The four-times Asian champions are expected to qualify for their sixth consecutive World Cup finals.
New coach Halilhodzic lead Algeria to a last-16 berth at the 2014 World Cup in Brazil and looks like he could be the man to lead Japan to greater heights.