Rossi takes reins at Palermo
Zenga's fate was sealed after his side could only draw 1-1 at home to Sicilian rivals Catania at the weekend.
"Palermo announce the appointment of Delio Rossi as first team coach," said a statement on the club website.
"He has signed a contract up to June 30, 2011 with the club having an option to extend the deal for a further season."
Rossi lifted the Italian Cup with Lazio in May but quit a month later after deciding he did not have the full backing of the club. He has since been out of work.
He took over at cash-strapped Lazio in 2005 and guided them to a third-place finish in 2007 and Champions League football the following season.
Zenga, who coached Catania before making the surprise switch to the island's capital in the close season, is the latest in a string of managers to be axed by uncompromising Palermo president Maurizio Zamperini.
The 49-year-old had made a decent start to the season with the mid-table side, so much so that media reports were even talking him up as a future successor to Inter Milan coach Jose Mourinho.