The former defender signs a two-year deal with Los Che and replaces Unai Emery, who now looks increasingly likely to become the next coach of Spartak Moscow
The 40-year-old has put pen to paper on a two-year contract with Los Che after Unai Emery announced his decision to leave the club at the end of the season.
A statement released by Valencia read: "This afternoon, the Board of Directors ratified the agreement made last Friday which sees Mauricio Pellegrino become the new first-team coach of Valencia for the next two seasons."
Pellegrino has not previously held the position of head coach at a club, but did serve as an assistant to Rafa Benitez at both Liverpool and Inter.
However, the former Argentina stopper did spend six years at Valencia as a player, between 1999 and 2005, where he won two Liga championships and finished as a runner-up in the Champions League for two successive seasons.
The coaching change will almost certainly intensify the speculation linking predecessor Emery to the hotseat at Spartak Moscow, who are expected to make an approach for the Basque boss.
The trainer took charge of Valencia in 2008 following his impressive exploits with Almeria and lead the Mestalla outfit to three consecutive third-place finishes in La Liga but struggled to mount a title challenge throughout his tenure.