Gerrard comes in as a replacement for Dean Smith, who was sacked earlier this week following a run of five successive Premier League defeats.
Gerrard leaves his position as manager of Scottish champions Rangers, where he had been in charge for the last three-and-a-half years.
Gerrard was appointed Rangers manager in the summer of 2018 and led them to their first league title in ten years last season.
Gerrard said: "Aston Villa is a club with a rich history and tradition in English football and I am immensely proud to become its new head coach.
"In my conversations with Nassef, Wes and the rest of the Board, it was apparent how ambitious their plans are for the club and I am looking forward to helping them achieve their aims.
"I would like to express my sincere gratitude to everybody associated with Glasgow Rangers for giving me the opportunity to manage such an iconic football club.
"Helping them secure a record-breaking 55th league title will always hold a special place in my heart. I would like to wish the players, staff and supporters the very best for the future."
Villa CEO Christian Purslow added: “It has been very clear in our discussions with him that Steven’s coaching ambitions, philosophy and values entirely match those of Aston Villa.
“We are excited he has agreed to lead us in the next phase of our ambitious plans as we look to build on the progress made since Nassef Sawiris and Wes Edens took over the club in 2018.”
Gerrard's first game in charge of Aston Villa will be against Brighton and Hove Albion after the international break but a reunion with Liverpool will be in a month's time at Anfield.
