Caio Junior only took charge of the Porto Alegre-based outfit in December but his shock departure was announced on Monday evening.
Gremio have now moved to install Luxemburgo has his successor, with the former Brazil coach only having just parted company with Flamengo.
"Gremio officially announce the hiring of Vanderlei Luxemburgo as the club's new coach until December 31, 2012," the Tricolor confirmed on their official website on Tuesday.
"The coach will be officially presented to the media on Thursday afternoon."
The 59-year-old is one of the most experienced and well-travelled coaches in Brazilian football. Indeed, this is his 28th managerial appointment.
However, he has not won a major title since leading Santos to the Brasileirao in 2004.
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