Osieck, who was an assistant to Franz Beckenbauer when West Germany won the 1990 World Cup, replaces Dutchman Pim Verbeek who vacated the post after this year's finals in South Africa.
The 61-year-old led Canada to a Gold Cup triumph in 2000 and has also coached Turkish club Fenerbahce. His most recent work was at Japanese club Urawa Reds, who he led to the Asian Champions League title in 2007.
Osieck was presented by FFA chairman Frank Lowy in a live telecast from Ljubljana, where the Socceroos play Slovenia in a friendly later on Wednesday.
"Holger has had a lifelong passion for developing football not only as a coach but as an educator and he will impart a winning philosophy to players and coaches alike," Lowy said.
Osieck's first task will be to prepare the Socceroos for their second Asian Cup finals campaign in Qatar in January but he will also be expected to lay the groundwork to qualify for the next World Cup in 2014.
"I am excited about working with the Socceroos," Osieck said.
"Taking over at a stage of natural transition as we start our preparations for 2014 is an ideal opportunity to influence the future direction of the young players and coaches from Australia."
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