Former Cameroon coach Le Guen was chosen ahead of Belgian Tom Sainfiet and Salisu Yusuf, who has been the country's caretaker coach since May.
He led Cameroon to the 2010 World Cup and has coached top French clubs Lyon and Paris Saint Germain, as well as Scottish side Rangers, with his last job being with Oman, who sacked him in November 2015 after a difficult start to their World Cup qualifying tournament.
Le Guen has officially been named as the technical adviser of the team, with Yusuf one of his assistants in the role of chief coach.
The 52-year-old has been linked with the Nigeria post for several months after Sunday Oliseh walked out on the Super Eagles in February, following what the former Nigeria skipper claimed were several breaches to his contract, including the non-payment of his salary for several months.
The Nigeria Football Federation (NFF) have assured a regular payment of the new coach's salary, believed to be about $50,000 a month, as it will be covered by a private company after the government said it would not bankroll it.
The immediate task for Le Guen, who led Lyon to three Ligue 1 titles between 2002 and 2005, is to help the Super Eagles qualify for a sixth World Cup, beginning in October with a tricky visit to Zambia.
The coach takes over a team that failed in Africa Cup of Nations qualifying for the second successive time in March.
The three-time African champions are now 70th in the FIFA rankings.