The 45-year-old replaces Brazilian Carlos Alberto Parreira, under whom he worked as an assistant over the last four years.
His appointment keeps a promise the country's football association made to appoint a local once the World Cup was over.
"I feel extremely privileged to be filing Carlos Alberto Parreira's shoes," Mosimane told reporters.
"I thank both the football association and Parreira for having confidence in me and I know I'm the right person for the job."
Mosimane's first mission will be to oversee the qualifying campaign for the 2012 African Nations Cup finals. Qualifying starts in September with a home game against Niger.
His first game in charge will be a friendly against World Cup quarter-finalists Ghana at Johannesburg's Soccer City on August 11.
Mosimane, a former international striker, had a previous spell as South Africa's caretaker coach, winning three, drawing three and losing one of his seven matches in charge.
South Africa, the first host nation to fail to get past the World Cup group stage, jumped 17 places in the latest FIFA rankings on Wednesday to 66th place.
