The former Fulham boss has been favourite to take the vacancy over the last few weeks and was expected to be appointed today.
The 41-year-old comes into the fray following the untimely death of Gary Speed, who committed suicide at his home in Cheshire last November.
FAW chief executive Jonathan Ford said: "This has been a very difficult process. We have explored every avenue, every scenario possible. We have taken on board the thoughts and views of the backroom staff, the players and the supporters.
"All along we believe that we have been respectful and dignified and had no wish to be involved in a public debate on the appointment of Gary's successor.
"Gary was the manager of Welsh football and of course we want to continue his legacy. He was not a figurehead, he was the manager and that is why we have decided on the appointment of Chris Coleman to build on the excellent foundations put in place by Gary."
Coleman recently quit his post at Greek side Larissa due to mounting financial trouble.
The Wales squad will join together for the first time since Speed's death when they take on Costa Rica next month.