The former Scotland international midfielder has resigned as Norwich City's Head of Professional Development to take charge of the Bairns.
"It's an exciting move for me," he told Falkirk's official website. "I've worked under some good managers and learned a lot. Their advice was always the same – get your coaching badges and work hard. That has proved to be correct.
"As time went on, I felt that after three years good experience as a reserve and youth coach, I was ready to make the move into management. It was a case of finding the right club at the right time so I am delighted that I have the opportunity to coach Falkirk at this early stage of my management career.
"I was particularly attracted to the infrastructure and Academy set-up at Falkirk and working with good, young players. It may be a cliché but I agree with the sentiments that if you are good enough, then you are old enough."
Holt replaces Steven Pressley, who left his job to become Coventry City's boss last month.
The 40-year-old's first game in charge will be against Hibernian in the Scottish Cup semi-final next weekend.