Winter, 43, currently on the coaching staff at Ajax Amsterdam, where he began his playing career, told Dutch newspaper De Telegraaf a deal was reached last week.
"I visited the club last week for two days and left with a good feeling. They felt this way as well because before I had returned I got a call. Of the three candidates, I made the best impression. Around New Year everything was concluded," he said.
Toronto were not immediately available for comment.
The Canadian club hired former Germany coach Jurgen Klinsmann and his company Soccer Solutions in November to help resolve their on-field problems after a disappointing season.
Former New England Revolution and Plymouth Argyle manager Paul Mariner had been heavily linked with the Toronto position.
Winter, who was born in Suriname, made 84 appearances for the Dutch national team and also played in Italy with Inter Milan during a successful career as a defensive midfielder.
Winter's former Dutch team-mate Ruud Gullit had a brief and unsuccessful spell in MLS with L.A Galaxy in 2007-08.
Toronto missed out on the play-offs last season after finishing fifth in the Eastern Conference with a 9-13 record.
The club joined MLS in 2007 and has been successful in attracting a strong fan base but their off-field promise has not been reflected in the playing results.
