The 66-year-old will guide the Sbornaya through the qualification process for the 2014 World Cup in Brazil following the resignation of Dick Advocaat in June to join PSV.
The Sbornaya have been seeking a new head coach since Dick Advocaat stepped down from the role following a poor Euro 2012 campaign, in which the team won just one of its three group games to finish below Greece and Czech Republic and exit at the first hurdle.
The Russian FA had drawn up a shortlist that included former Tottenham manager Harry Redknapp and former Barcelona boss Pep Guardiola.
Capello, who boasted an impressive 67 percent win rate while in charge of England, resigned from his Three Lions role in February in protest of John Terry being stripped of the captaincy.
The role with Russia will be the Italian’s eighth managerial job after stints with European giants AC Milan, Real Madrid and Juventus and will see Capello earn a reported 10 million euros a year.
Russia will play its first World Cup 2014 qualifier on Sept. 7 when the team faces Northern Ireland.
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