Schneider had enjoyed a lengthy career with the Swabian giants as a player, first joining a club as a 10-year-old in 1983 and representing the first team between 1991 and 2003, winning the Bundesliga in 1992 and the DFB Pokal in 1997.
The 40-year-old's only senior coaching role, however, was with minnows Dingolfing.
"I'm really looking forward to the job at hand and I'm full of confidence," Schneider told reporters.
Sporting director Fredi Bobic added: "I'm glad we have found a solution so quickly. I'm sure we are well positioned with the coaching staff. [This is] not an interim solution."
Meanwhile, Alfons Higl and Tomislav Maric have joined Schneider as members of his coaching staff.