After being sacked last season by Wolves, the 53-year-old has been out of work since February, but with the Tractor Boys currently sitting bottom of the Championship, they have moved quickly to replace Paul Jewell and McCarthy is excited about the challenge ahead.
"I'm obviously delighted to have been given the job as Ipswich Town manager and I'm looking forward to the challenge ahead," McCarthy told the club's official website.
"It's a fantastic football club, with a proud tradition and history and a terrific fanbase. While the long term ambition is to take the club back into the Premier League, it's clear that the first priority is to get some confidence back into the team and start climbing the table."
He is set to be reunited with former assistant boss Terry Connor at the club, and chief executive Simon Clegg is delighted with the appointment of the experienced former Republic of Ireland manager.
"I am delighted to welcome Mick and Terry to Portman Road," Clegg said.
|6/5||Ipswich are 6/5 to be relegated from the Championship with Paddy Power|
"We are under no illusions of the challenge ahead for this club given our position in the table but we feel we have the right manager to lead that challenge.
"Mick has a wealth of knowledge in the game and has shown that he knows how to compete successfully in the Championship in his time at both Sunderland and Wolves.
"While the first task is to guide the club away from our current position, we believe Mick has all the credentials and drive to eventually bring success back to Ipswich Town."
Ipswich have taken just seven points from their opening 13 league games so far this season and are rooted to the bottom of the league with just one win to their name.