The 44-year-old has signed a two-year deal at the Stade Geoffroy-Guichard, joining the Ligue 1 outfit from his previous role at Red Bull Salzburg.
Garcia replaces Christophe Galtier in charge at Saint-Etienne after the 50-year-old parted company with the club at the end of last season following an eight-year spell at the helm.
"We took our time to choose a coach who would help the club take a new path in its progress. We studied a huge number of applications," president Roland Romeyer told the club's official website.
"Oscar Garcia has the perfect profile. He is competent, as proven by his success with Salzburg, but also passionate, experienced and innovative. I am convinced he will move ASSE forward."
Garcia won two Austrian Bundesliga title and two Austrian Cups during his time in charge of Salzburg.