Cathro was sacked yesterday after just seven months in the role following Hearts' early exit from the League Cup.
Hearts face defending Scottish champions and last season's treble winners Celtic in their opening game of the season on Saturday, and Daly will take charge of first-team duties until a new manager is appointed.
"Following on from yesterday's announcement, the club can confirm that the recruitment process is already underway to identify and appoint a new permanent head coach," read a statement on the club's official website.
"During this process, Jon Daly has been asked to take charge of first-team matters on an interim basis, supported by the current coaching team of assistant head coach Austin MacPhee and first-team coach Liam Fox.
"This interim setup will take charge of the first-team's Ladbrokes Premiership match at Celtic on Saturday, and until a new head coach has been appointed."
Hearts finished fifth in the Scottish Premiership table last season, a full 60 points behind champions Celtic.