The Galatasaray boss will now also be in charge of the national side and will attempt to get their World Cup qualifying campaign back on track
Terim, 59, has already performed the role of Turkey boss on two previous occasions. His most successful stint with his country was back in 2008, when he guided the team to the semi-finals of the European Championship.
And Terim, who will takeover for the remaining four qualifiers as Turkey look to reach World Cup 2014, has already outlined his targets.
He told reporters: "We will give everything we have to be in Brazil for World Cup. But our main goal is reshape the Turkish football and resolve the problems."
Galatasaray's coach replaces Abdullah Avci following the mutual termination of his contract, with Turkey struggling to make the World Cup.
Terim's men are in fourth place in Group D, having taken seven points from their opening six matches. Their next game is against Andorra.