Pochettino has been out of football since being sacked by Espanyol in November of last year, leaving the Spanish side bottom of La Liga.
However, Southampton executive chairman Nicola Cortese believes that the Argentine is a high-quality manager who will help the club nurture its young players.
"This decision has been made with the long-term ambitions of Southampton Football Club in mind. Whilst we acknowledge the contribution Nigel has made during the past two years, for the club to progress and achieve our long-term targets a change was needed," said Cortese.
"Mauricio is a well-respected coach of substantial quality who has gained a reputation as an astute tactician and excellent man manager. I have every confidence that he will inspire our talented squad of players to perform at the highest possible level.
"He also shares my belief that the most successful clubs are built by nurturing young players through a development system that provides a clear path to the First Team, thereby creating a culture that keeps them at the club for the long term. This is an approach he has employed with great success in the past and I look forward to him bringing that experience and expertise to Southampton."
Pochettino, 40, said that he was delighted to be joining a club like Southampton, and hopes to lead them on to prolonged success in England's top division.
"This is the kind of opportunity that any coach would relish. Southampton is a club with great heritage, and an even more exciting future," said the Argentine.
"There is a clear vision to take the club to a new era of sustained success in the Premier League, and beyond, which I'm delighted to be part of."