Bielsa had been jobless ever since he was sacked by Leeds United in February 2022.
The 67-year-old has signed a contract through to the 2026 FIFA World Cup due to be held in the USA, Canada and Mexico.
Uruguay dispensed with the services of Diego Alonso after they crashed out of the World Cup in Qatar in the group stages.
Bielsa has previously managed Argentina and Chile.
In club football, Bielsa counts Espanyol, Athletic Bilbao, Olympique Marseille and Lille among his former clubs.
“The fans are calling for games and emotions. The time has come,” read a message on the team’s official Twitter account, which also confirmed the appointment.
Bielsa will begin his tenure in charge of Uruguay with friendly matches against Nicaragua and Cuba next month before South America's World Cup qualifiers start in September.
