The 35-year-old, who was born in Nottingham, had most recently been on loan at fellow Championship club Millwall but has now had his contract with QPR terminated so that he can take over at Meadow Lane.
He will be aided in his position by the more experienced former Carlisle United manager Greg Abbott, who becomes his assistant.
County chairman Ray Trew told the club website: "Shaun is someone who can relate to the players and, perhaps more importantly, relate to this club, but he is not naive enough to think that he could take this step alone.
"That is why he has turned to Greg Abbott, a man with a wealth of experience in the Football League, as a coach and manager, and someone that he has worked with in the past, to assist him in his new role.
"Having met with them both at length I am confident that they have what it takes to not only turn our fortunes around this season, but to go on and deliver the success and stability that we are craving here at Meadow Lane."