After serving an apprenticeship in South Australia and plying his trade in southeast Asia, the experienced coach will get a chance to make a name for himself at the Jets
Clayton Zane had served as the Jets' interim coach following Gary Van Egmond's removal from the top job in January.
Despite being overlooked for the role on a full-time basis, Zane will stay on as Stubbins' assistant.
The 51-year-old was a member of Aurelio Vidmar's staff at Hindmarsh Stadium when he took the Reds to the AFC Champions League final and A-League grand final.
Stubbins, who has since had spells in charge of Bangkok Glass and Ayutthaya FC on Thailand, will be charged with qualifying for the finals in the 2014-15 campaign.
"My efforts will be to cultivate a clear identity and winning culture here at the Newcastle Jets," he said in a statement.
Jets CEO Robbie Middleby meanwhile is confident the club have the man to revive their stagnant fortunes.
"Phil is an experienced coach who knows the A-League and has strong man management skills," he said.
"He will bring a winning mentality to the club and he knows what it takes to be successful."
Newcastle fan favourite Michael Bridges, who retired at the end of last season, will embark on a coaching career in charge of the club's Under-18 team.