The Saints had been without a boss since Mauricio Pochettino made the move to Tottenham Hotspur last month.
Koeman quickly emerged as the favourite to take the position, with the 51-year-old available after leaving Feyenoord at the end of last season.
"We're delighted to confirm that Ronald Koeman is our new First Team Manager. Welcome to #SaintsFC, @Koeman1963!" read a tweet from Southampton's official Twitter account.
The former Barcelona midfielder has also managed the likes of Ajax, Valencia and PSV Eindhoven during a well-travelled career.