Lippi, who led the Azzurri to the 2006 World Cup, replaces South Korea's Lee Jang-soo at the big-spending Chinese club.
"According to the club's strategic development needs, a considered decision has been made to appoint Mr. Marcello Lippi to serve as head coach for the Guangzhou Evergrande football club," a statement on the club's website said.
"The appointment is for two years and six months."
Guangzhou grabbed global headlines by signing Argentine Dario Conca last year for an undisclosed sum that is speculated to have broken Chinese transfer records and the club have made it to the last 16 stage of the Asian Champions League.
As a club coach, Lippi won several Serie A titles and the Champions League with Juventus.
The 64-year-old Italian took Italy's reins again for the 2010 finals in South Africa but the defending champions were packed off at the group stage without winning a game.
"I have paid attention to the club and watched games in recent months, including games of the Chinese Super League and AFC Champions league," Lippi said in a news conference at a hotel in China's southern industrial city of Guangzhou.
"Now I can tell every player in the team. But I just know their numbers for the moment, I will gradually remember their names.
"I began to talk to my assistants and I successfully persuaded them to come here along with me."
Graft, match-fixing scandals and crowd violence have often dogged Chinese football driving fans away from the game.
The performance of the national team, who failed to qualify for the 2014 World Cup despite employing former Spain coach Jose Antonio Camacho, has also demoralised the supporters.
However, Shanghai Shenhua's signing of French striker Nicolas Anelka from Chelsea and the appointment of former France international Jean Tigana as the coach have brought at least some interest back in China's domestic football.
Tigana was subsequently sacked last month.
Lippi, who has also coached Inter Milan, said his job would be no different in China.
"I will start my job from this afternoon on and off the pitch," he said. "I will lead this team with my extraordinary passion and most professional knowledge.
"At this moment, upon my arrival, it should be a influential event that could be the most important thing in China today."
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