The 61-year-old had been out of work since being sacked by Newcastle United in October and had been contemplating retirement after receiving tons of abuse from the Magpies’ fans.
West Brom sacked Valerien Ismael earlier this week after seven months in charge, with the Baggies fifth on the championship table, eight points adrift the automatic promotion places.
Bruce said: "I am delighted to have the opportunity to manage a club that has such great history and tradition. It is a club I obviously know well from my time in the Midlands, and I am already relishing the challenge of taking it forward.
"I did not envisage I would return to management this quickly, but once I got the phone call from Ron (Gourlay), I knew I could not resist the challenge of getting this club back to where they want to be.
"I am coming in with one aim and that is to get Albion to the Premier League."
Gourlay, West Brom's newly-appointed CEO, added: "Steve is a highly-respected and experienced manager who has an impressive record of earning promotion to the Premier League.
"His excellent man-management skills, tactical nous, and ability to hit the ground running were among the many reasons we decided he was the man to take us forward.
"Promotion remains our objective for this season, and we are confident that with Steve leading the club we have given ourselves every chance of achieving that goal."
