Warne has been in charge of the Millers since Kenny Jackett's departure in November, initially taking over as a caretaker manager before being handed the reins until the end of the season in January.
The 43-year-old was unable to prevent Rotherham's relegation to League One, with their fate being sealed by a 1-0 defeat to Fulham last Saturday.
However, as they begin to prepare for life back in the third tier the club have now handed Warne a one-year rolling contract after the board "unanimously" agreed that he was the right man for the job.
"Firstly, I am delighted that following the meeting of the board this morning, Paul Warne has accepted the permanent position of first team manager. Paul has greatly impressed the board in a number of areas, in what has been a very difficult situation over the past few months. Paul knows the club inside out. He is a Miller, through and through," chairman Tony Stewart told the club's official website.
"Whilst he has held the title of fitness coach, he has always been much more than that under a succession of managers who have all tapped into his knowledge, motivational skills and coaching ability. He may be new to management, but all first time managers have to start somewhere. Just look at our club as an example of the past where many of our most successful managers joined at a relatively early point in their managerial career.
"The club has learned many lessons during the campaign but we are determined to ensure, under Paul Warne, that going forward we will play the type of football that brought us so much success in recent seasons. In Paul we have someone who understands this club, and also understands the type of players and characters needed to succeed. As such, he will work closely with our head of recruitment Jamie Johnson, on what will be an improved and in-depth recruitment and scouting operation which is well underway.
"There will also be a greater emphasis on developing our own players more effectively to try and ensure greater long-term stability for the club. We are already excited about what we can achieve next season, and in future seasons, with Paul as our manager in a new and vastly improved structure. I personally feel the same passion, enthusiasm and commitment for Rotherham United as the first day I walked through the door.
"Whilst we all feel the disappointment of this season, we have to put things into perspective. We have earned rapid success on the field with back-to-back promotions, followed by three seasons in the Championship. In reality, the infrastructure behind the scenes couldn't catch up with the success on it, but I wouldn't swap those good times for anything, and the lessons we have learned will stand us in good stead for the future.
"Next time we are in the Championship, and I have no doubt that there will be future success for this club, we will be stronger and the foundations will be rock solid. I would like to thank the fans for the tremendous support throughout my tenure here. I urge you all to get right behind Paul for the remainder of this season and beyond, and rest assured everyone at the Club will be working over-time to bring success and winning football back to the AESSEAL New York Stadium."
Rotherham have won just four matches all season, leaving them 17 points adrift at the bottom of the Championship table and 24 points from safety.