Grayson has a proven track record in League One, having previously won promotions with Blackpool, Huddersfield Town, Leeds and Preston.
More recently, Grayson was manager of Sunderland, spending four months at the helm of the Black Cats before being sacked in October.
A Bradford statement on their official website read: "Grayson has been our number one target to take over first-team affairs since the search began earlier this week. He will meet the players tomorrow and will be in charge for the Bantams trip to Charlton Athletic on Tuesday.
"Due to the timing of this appointment, there will be no press conference [on Monday] so that the whole club can focus on our important game on Tuesday. A date for an official press conference will be confirmed later in the week."