The former Charlton Athletic manager replaces caretaker coach Mark Lillis at the John Smith's Stadium, with the club 21st in the Championship
Former England defender Powell replaces caretaker coach Mark Lillis, who had stood in for Mark Robins for almost a month.
Robins parted company with Huddersfield just one day after they kicked off their season with a 4-0 home defeat to Bournemouth.
The 44-year-old Powell last worked at Charlton Athletic but was sacked in March after reportedly falling out with the club's owner, Roland Duchatelet.
And Huddersfield chairman Dean Hoyle believes Powell's experience makes him the right man for the struggling Championship club.
"We're delighted to be able to welcome Chris to Huddersfield Town as the new manager," Hoyle told the club's official website.
"We've taken our time over this appointment as we wanted to give ourselves time to put in the groundwork and ensure we get the right man for the job. We believe we have in Chris.
"As I said when the process began, I felt it was important that we found a manager who had 'done it' and Chris certainly fits that bill.
"He has 'done it' by guiding Charlton to promotion to the Championship and then finishing ninth in the 2012-13 Championship season – all achieved on a limited budget by getting the best out of his players.
"We've met Chris to discuss the job in two long meetings and both times he has impressed us with his enthusiasm, passion and knowledge of Huddersfield Town and the Championship.
"He is personally highly motivated and we feel he will get the best from the players. His record demands respect and we think he is the ideal man to take this club forward."
Huddersfield sit in 21st place in the Championship after winning just one of their first five matches.