The Bosnian led Algeria to the last 16 of the 2014 FIFA World Cup in Brazil last month, but left the position following the expiry of his contract.
He had already been welcomed to Turkey via the club's official Twitter account on Saturday, but no details of the deal were released.
However, Halilhodzic has since travelled to meet Trabzonspor officials, and a brief statement on the club's website on Monday confirmed the terms of his appointment.
"Professional football team coach Vahid Halilhodzic is provided with a two-year deal," it read.
Halilhodzic had long been linked with the vacancy at Trabzonspor, where he managed from 2005 to 2006, and the 61-year-old's CV also includes stints in charge at Paris Saint-Germain, Dinamo Zagreb and the Ivory Coast.
