Hockaday, whose only previous managerial role was with Conference outfit Forest Green Rovers, emerged as a contender early this month when bookmakers made him favourite for the role.
That was met with disapproval from many Leeds fans who were hoping that owner Massimo Cellino would opt for a more experienced coach to replace Brian McDermott.
However, the Italian has pressed ahead and secured the 56-year-old's services on a two-year deal.
Hockaday was part of Aidy Boothroyd's backroom team when Watford beat Leeds in the second-tier play-off final at Wembley in 2006.
Leeds finished last season 15th in the Championship and have now spent a decade outside of the Premier League.
Junior Lewis, the former Gillingham midfielder, has been named as Hockaday's assistant.
