The Istanbul club last week revealed that they were in talks with the former Italy coach, who resigned after his country's disappointing FIFA World Cup campaign.
Galatasaray issued a statement on their website on Monday confirming that the 56-year-old will replace compatriot Roberto Mancini, who left the club by mutual consent last month.
Prandelli is due to arrive in Istanbul on Monday evening (local time) and sign his contract on Tuesday before holding a press conference.
The experienced Prandelli spent four years in charge of his country after taking over from Marcello Lippi and guided the Azzurri to the final of the 2012 European Championship, when they were beaten by Spain.
He signed a new two-year deal to stay on as Italy coach in May, but stepped down after the four-time world champions failed to progress from Group D in Brazil - winning only one game against England.
Galatasaray announced last month that president Unal Aysal had held informal talks with former Manchester United manager David Moyes, but a spokesman added that Germany coach Joachim Low and United States boss Jurgen Klinsmann were the club's prinicipal targets.
They have now turned to Prandelli, though, and he will return to coaching at club level for the first time since leaving his role at Fiorentina to take the Italy job.
