The former Sydney FC defender declined the chance to take over the Sky Blues, instead electing to sign a four-year deal at their new city rivals, with Lyall Gorman appointed CEO
Fairfield-born Popovic, 38, had been coveted by both Sydney clubs, but reportedly turned down Sydney FC - the team with which he finished his playing career in 2008 - to take charge of the competition's newest outfit on a four-year deal.
In one of two crucial appointments for the fledgling club announced on Thursday, Lyall Gorman has been appointed chief executive officer after vacating his position as A-League chief.
"This is a once-in-a-lifetime opportunity to coach the new club in western Sydney and I'm really excited about the mission ahead of us," former Australia central defender Popovic said.
"I grew up in west Sydney and learned my football there, but it's the challenge of a start up club in football's heartland that has brought me home.
"I know the region has a great passion for the game, fantastic junior ranks and thousands of life-long fans. These are ingredients that can help make our club a success."
Popovic told reporters he would begin working on putting together his squad immediately, admitting it "was a task".
"We are short of time, but we're confident we're going to have a competitive team from the outset," he said.
The 58-cap Socceroo said the decision to take on the western Sydney club was an opportunity he could not refuse, and that it was the only serious option for him if he was to leave Palace.
"I never had any detailed discussions with Sydney FC," he said. "There was nothing formal ever discussed there. It was really about making sure I left on really good terms with Palace."
Popovic began his coaching career as an assistant with the Sky Blues, before moving to English Championship club Crystal Palace - another former club in his playing career - to take a similar role in January 2011.
As reported by Goal.com on Monday, Popovic had informed Palace before the weekend that he would be returning to Australia, though the club had told its supporters at Saturday's player of the year awards that he was scouting in Australia and Asia.
Palace co-chairman Steve Parish had earlier told the South London Pressthat Popovic had agreed a five-year deal with Football Federation Australia to take over the new club, with only compensation over the latter's existing contract to be agreed.