Iachini, 55, replaces Vincenzo Montella who was sacked on Saturday with the team trailing in 15th place, three points above the relegation zone.
“The current ranking has forced us to change coach,” said Fiorentina owner Rocco Commisso.
“We chose Iachini because he is a man of substance, tied to Florence and Fiorentina.
“Now we have to stay united and get back on the right track as soon as possible.”
“The current ranking situation has forced us to change coach.”
Former Fiorentina midfielder Iachini lined out 127 times for the Tuscany club between 1989 and 1994 during his playing career.
Since turning to coaching in 2002 he has managed Italian teams including Sampdoria, Palermo, Sassuolo and Udinese.
He has been without a club since being sacked by Empoli last March.
Iachini will be presented to the press on December 28, leading his first training session the following day.
Fiorentina lost 4-1 at home to Roma on Friday and have taken just two points from their last seven games.
Buoyed at the start of the season by the arrival of Franck Ribery, the team has been struggling since the Frenchman suffered a serious ankle injury that will keep him out until February.
Fiorentina have started their winter break and do not play again in Serie A until January 6.
AFP
