Nuremberg dropped into the second tier of German football after losing seven successive matches to end the 2013-14 season.
Gertjan Verbeek was sacked during that dreadful run and interim coach Roger Prinzen was unable to stop the slide.
They will hope for better fortunes under Ismael, though, who was previously a reserves coach at Wolfsburg.
Ismael represented Bayern Munich, Werder Bremen, Strasbourg and Lens during his playing career and will look to help the club back into the top flight immediately.
A Nuremberg statement read: "Valerien Ismael has been named as the club's new manager.
"The 38-year-old football coach signed a contract at the Valznerweiher Sportpark on Thursday.
"Born in France, Ismael also holds German citizenship and was most recently in charge of VfL Wolfsburg's reserve team."
Ismael will also hope to stop an exodus that has seen Makoto Hasebe, Timothy Chandler and Adam Hlousek leave the club this week.
