McClaren, 54, was sacked by Derby on May 25 having overseen the Rams sliding from the top of the Championship to an eighth-place finish with just two wins in their last 13 games of the season.
But the Magpies, who only escaped relegation to the second tier courtesy of a final-day victory over West Ham, have put their faith in McClaren following the decision to part ways with caretaker-manager John Carver and his assistant Steve Stone.
McClaren, who has turned down the Newcastle job three times in recent years, has signed a three-year deal with the option of a further five.
He said: “I am privileged to be appointed head coach of Newcastle. This is a big club with a wonderful heritage. St James’ Park is like a cathedral on Saturday afternoon, a symbol for the city and I am excited to be given this opportunity.
“I know how important Newcastle United is to the city and the region. The supporters are the most loyal, passionate and devoted in the world. Despite everything, they maintain their faith. We owe it to them to do everything we can to reward them with success.
“There’s a lot of work to do but the club has made it clear about wanting success and I would not have come here if I didn’t believe they were serious. This club has waited far too long to win a trophy. That’s one of my primary objectives here.
“I’ve already won trophies as a manager and a club the size of Newcastle United should be winning Cups and finishing in the top eight of the Premier League.
“I’m determined to give the supporters a Newcastle United they can be proud of. The hard work starts now.”
McClaren began his managerial career as Deby assistant in 1995 and went on to become Sir Alex Ferguson’s right-hand man at Manchester United until 2001.
After two years as Sven Goran Eriksson’s assistant for England, McClaren quit the role in 2002 to concentrate on matters at Middlesbrough, who had given him his first managerial post the year before.
During his five years at the Riverside, Boro won the League Cup and qualified for Europe for the first time in their history, and McClaren was rewarded with the England job in 2006.
His tenure as head coach of the national coach – the shortest in England’s history at just 16 months and 18 games – was a disastrous one as England’s failure to qualify for Euro 2008 resulted in his sacking in November 2007.
He went on to manage FC Twente (twice), Wolfsburg and Nottingham Forest before returning to Derby in 2013.