The 59-year-old has signed a one-year contract and will take charge of Turkey's four remaining World Cup qualifiers, replacing Abdullah Avci after he quit on Tuesday.
It is Terim's third stint in charge of the national team with the first ending in qualification for Euro 1996 while he also guided Turkey to the semi-finals of Euro 2008.
"I would like to thank the Turkish Football Federation for the faith they have shown in me and for allowing me to carry on at Galatasaray," Terim said.
"You can't escape the responsibility of leading your country and without team work nothing is possible.
"Everyone needs to pull together to help us achieve our goal and I hope to build a team that can qualify for this World Cup and more to come."
Turkish Football Federation president Yildirim Demiroren believes Terim's experience can help nurture the next generation, while he praised Galatasaray for their support of the decision.
''Turkish football has many problems especially in youth level and therefore we wanted to appoint Mr Terim," Demiroren said.
"Terim can solve these problems with his experience, successes in the past and his passion.
"I am thankful to Galatasaray's president Unal Aysal and the club for giving permission to their coach for this job.
"This new period in Turkish football has begun."
With four qualifiers remaining, Turkey sit fourth in Group D, four points behind second-placed Hungary and well behind leaders the Netherlands.
