Allardyce joins the club after arriving back in England on Wednesday, following a holiday in Dubai, to finalise an agreement with the Everton board.
The 63-year-old was in attendance alongside major shareholder Farhad Moshiri and chairman Bill Kenwright for Wednesday night’s 4-0 victory against West Ham at Goodison Park.
Sammy Lee joins the club as assistant manager, Sky Sports News understands, while former Leicester boss Craig Shakespeare – who was Allardyce’s right-hand man during the ill-fated four-month spell with England – will also join the backroom team.
In an official Everton statement, Allardyce said: “The attraction of the club itself, the people I’ve known at the club – Peter Reid is one of my best mates, so are Andy Gray and Paul Bracewell whom I worked with at Sunderland – these people have always made me aware of just how special and unique a club Everton is and I feel really enthused and energised to come in as manager.
“I’ve always thought Everton was a great club. It is a great club. Obviously, the club has gone through a difficult spell and hopefully I can put that behind us as quickly as possible and start looking upwards again.
“Because, ultimately, it’s the ambition of the club, the ambition of the owner and the board, allied to the fact that it’s Everton and all the fantastic history, which have proved to be key for me.”
Everton owner Moshiri added: “I’m delighted to confirm Sam as our new manager. His strong leadership will bring great motivation and get the best out of players.
“Sam understands the long-term ambitions we have for this great club and I know he is a man who gives it his all and is focused 24 hours a day on the club.
“Evertonians are the most passionate and best fans in the world and when the club does badly we all suffer. But in football everything changes very quickly, so I hope this will help to propel us to where we should be.
“I would like to put on record our thanks as a Club to David Unsworth for stepping up when we needed him over the last few weeks. He is a real Evertonian, embodying the commitment, pride and passion we all feel for the club.”
Unsworth endured a difficult period in interim charge of the Toffees – who have won just two of the last 13 games – and will return to his previous U23 role.
Duncan Ferguson is also expected to have a place in the coaching set-up.
Everton is Allardyce’s seventh Premier League club, and his first since leaving his role as Crystal Palace boss in the summer.
Palace chairman Steve Parish agreed to his departure, and it is believed the south London club would receive a compensation package of around £2m if Allardyce took a new job before next summer.