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."
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."
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.
"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."
