Zinedine Zidane had long been linked with taking over the Ligue 1 side but his former France international team-mate has been handed a three-year deal
Real Madrid assistant Zidane was heavily linked with taking over at his old club following the departure of Francis Gillot, but the Ligue 1 side confirmed earlier this week that they had been unable to broker a deal with the former midfielder.
Ex-Bayern Munich defender Sagnol, who played alongside Zidane with the France national team, has now been handed the post for the next three seasons after working with Les Bleus' Under-21 side for the past year.
"FC Girondins de Bordeaux are pleased to welcome Willy Sagnol as the new coach of the team," a statement on the club's official website read.
"The current coach of the France youth team is committed for the next three years. He will now begin his club coaching career in Gironde, until June 2017.
"Supporters, employees and lovers of the club are very pleased to see him start his club coaching career at Bordeaux. We wish him the very best of success with les Marines et Blanc."
Sagnol, 37, played for both Monaco and Saint-Etienne in Ligue 1, winning the title with the Principality club in 2000.
He went on to win 13 major honours with Bayern Munich, including the 2001 Champions League, and reached the final of the 2006 World Cup with France.