Rueda takes charge of Chile after the departure of Juan Antonio Pizzi, who left after failing to lead the nation to Russia 2018.
The 60-year-old's appointment was confirmed on Monday, with his deal running until the end of qualifying for the 2022 World Cup in Qatar and immediately renewable if Chile reach the showpiece event.
"We took the necessary time to find the best coach for our team," Chilean National Football Association (ANFP) president Arturo Salah said in a statement.
"A coach with experience in international teams, who has qualified for the World Cup and has a high level sporting career.
"We hope that Reinaldo Rueda achieves great goals with La Roja and that he brings his experience to all the teams, from the adult to the youth, transferring his knowledge, styles and technical definitions to all categories, which goes directly to one of the objectives of our strategic plan — sustainable results at the level of national teams."
Rueda was in charge of Colombia (2004-06) and Honduras (2007-10), helping the latter qualify for the World Cup in South Africa.
He was most recently at the helm of Flamengo.