The Dutchman has agreed to succeed Louis van Gaal after next summer's World Cup in Brazil and is set to take charge of the national team for the second time in his career.
The Dutchman has agreed to take over as coach from Louis van Gaal after the 2014 World Cup for two years, to be followed by a two-year spell as technical supervisor of the national side.
It is not expected that Hiddink will be unveiled by the Dutch Football Federation until the new year, but sources have said an agreement is now formally in place.
Hiddink, who managed Netherlands from 1994-1998, has spoken in recent weeks of his interest in taking over the national team for a second time.
The 67-year-old has been out of the game since resigning as boss of Anzhi Makhachkala in July, which, when he took over at the Russian club in February 2012, had been his first permanent club post in six years.
Hiddink is an experienced international manager, having managed Russia, Australia, South Korea and Turkey in addition to his native country.
One of the most successful Dutch coaches in history, Hiddink had been considered by Tottenham for a short-term role as they drew up a list of successors to Andre Villas-Boas, who was sacked on Monday.
The north Londoners made contact with Hiddink's representatives, but he was not eager for a repeat of the interim role he had at Chelsea in the second half of the 2008-09 season.
Spurs have put Tim Sherwood in charge temporarily and are prepared to make its former midfielder the club's next permanent manager if he impresses at the helm.
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