The 51-year-old former Accrington Stanley and Rochdale boss replaces Alan Wright, who was sacked earlier this week following a run of six straight defeats.
Coleman was introduced to his new players this morning and his first match in charge is scheduled to take place on December 21 when the Sandgrounders visit Salisbury City.
Southport chairman Charlie Clapham told the club's official website: "I am delighted to announce John Coleman as our new manager.
"John has all the experience and knowledge to take Southport Football Club forward. Everyone connected with the club will acknowledge it has been a very difficult period for the club after recent results, hence the actions the club with regret had to take.
"We now move on with a new manager who has all the credentials to achieve results. I am sure everyone will welcome John back to the club he played for in the 1980s."
Coleman represented Southport as a player between 1985 and 1988.