The French Football Federation announced the appointment on its Web site on Sunday after Laurent Blanc turned down a new contract offer last month.
Deschamps quit as Marseille coach a week ago despite leading the French club to a league title and a record three straight League Cups.
As a player, Deschamps captained France to victory at the 1998 World Cup and 2000 European Championship.
He also won the Champions League with Marseille in 1993 and Juventus in '96.
France went on a 23-match unbeaten run under Blanc and reached the quarterfinals at the European Championship, restoring some pride in a team that was knocked out in the first round of the 2010 World Cup and the 2008 Euros under former coach Raymond Domenech.
But Blanc could not prevent his players from again being questioned about their behavior and Deschamps' main task will be to introduce more discipline on and off the pitch.
Blanc started rebuilding the France team with relative success after players at the last World Cup shocked fans back home by going on strike at a training session to protest against Nicolas Anelka's exclusion from the squad for insulting Domenech.
Anelka was suspended for 18 matches while Patrice Evra, Franck Ribery and Jeremy Toulalan received shorter bans for their part in the strike.
Old demons came back last month to haunt the team with France internationals Samir Nasri, Hatem Ben Arfa, Yann M'Vila and Jeremy Menez facing a disciplinary commission on July 27 over their actions at this year's Euros in Ukraine.
Ben Arfa was involved in a heated bust-up following the 2-0 defeat to Sweden in the last group match.
In the quarterfinal 2-0 loss to Spain, Menez made a disgruntled gesture at captain Hugo Lloris and M'Vila left the pitch without shaking Blanc's hand. Nasri then aimed an expletive-laced rant at a journalist after the match.
Deschamps will have only a friendly against Uruguay next month to prepare for the upcoming World Cup qualifiers. In Group I, France will face Finland and Belarus in September and European champion Spain in October.
