"I'm very glad we were able to sign a contract with such a top coach," Lokomotiv president Olga Smorodskaya told the club's website.
"Bilic is one of the best coaches in Europe and we had to beat many clubs, including those from the English Premier League, in order to sign him."
Lokomotiv, who lost to city rivals Spartak 2-0 in the season's finale on Sunday, finished seventh and missed a spot in the Europa League next season.
"Lokomotiv is a big club and it's a big challenge for me," Bilic was quoted as saying by local media.
"But I have ambitions to achieve a good result here."
After hanging up his boots in 2001, the former Croatia international coached his hometown club Hajduk Split before taking charge of his country's national team in 2006.
After failing to qualify for the 2010 World Cup, Bilic's Croatia beat old foes Turkey in the playoffs to reach Euro 2012.
