The 52-year-old, who has signed a short-term deal, will team up with manager Harry Redknapp as they try to secure promotion to the Premier League by the end of the season.
"It's a great time to be coming to the Rangers," Downes told the club's official website. "We've made an excellent start to the season and are having a real go at trying to get back in the Premier League, which is what I'm sure all the fans, staff and players want.
"I was born only five minutes away from QPR. I was a fan growing up and was at Loftus Road most weeks, so it's special for me to be here now."
The West London outfit are currently third in the Championship table.