Football Federation Australia (FFA) chairman Frank Lowy made the announcement via video conference Ljubljana, where the Socceroos take on Slovenia in a friendly later today.
The 61 year old has been out of the game since leaving Japan’s Urawa Red Diamonds in 2008 but has been given the task of succeeding Verbeek following a disappointing World Cup campaign.
Osieck was an assistant coach to Franz Beckenbauer when Germany won the World Cup in 1990 before moving to club football to manage VfL Bochum (Germany), Fenerbahçe S.K. (Turkey), Urawa Red Diamonds (Japan) and Kocaelispor (Turkey).
He returned to the international setup in 1999, taking over the Canadian national side, and led them to the 2000 CONCACAF Gold Cup.
Former England boss Steve McClaren, Argentinian Marcelo Bielsa and Mexican Javier Aguirre are some of the others thought to have been approached by the FFA to take over the role.
“I feel very much honoured to be your choice,” said Osieck.
“It’s a very big challenge for me, it’s a great challenge.
“We’re not starting from scratch. Australia has done very well in recent years and made the past two World Cups and our first target should be to establish our team on that level on a permanent basis.”
Osieck’s first game in charge will be a friendly against Switzerland on 3 September, and he no doubt will be looking to rebuild a squad that has lost some key players to retirement and can expect to lose a few more before the 2014 World Cup.