The 40-year-old has only previously worked as a number two during his time in England, linking up with Garry Monk at both Swansea City and Leeds United.
"I will be working very hard to ensure their faith is repaid," he told the club's official website. "Right from the first time I spoke to the club, we were very much in tune about the challenges and opportunities here, which is what led me to realise that this was the right move in my career."
Chairman Darryl Eales added: "It is an appointment that demonstrates our growing reputation within football as a forward-looking and ambitious club.
"Pep was the unanimous choice of the board, and we believe he will build on the significant progress we have made over the past three years and accelerate our collective objective of sustainable Championship status."