The 45-year-old has worked with various age-group teams at the Eredivisie club and has also been Holland's assistant at last summer's European Championships since he retired as a player in 2012.
Van Nistelrooy will replace current boss Roger Schmidt, who will leave at the expiration of his contract at the end of the season.
"It has always been my dream to be head coach at PSV," former forward van Nistelrooy told the official club website.
"I've worked intensively with Toon Gerbrands, PSV's current general manager, the past few seasons.
"I was convinced I could pursue a professional coaching career and originally thought I needed one more year to gain experience, but sometimes things do go their way and you find out that life is not completely manageable. This is the right moment to take the next step."
During three years with PSV, van Nistelrooy scored 62 goals in 67 matches before a high-profile move to United.
Van Nistelrooy will be part of a new-look set-up at PSV, who also recently announced that Marcel Brands - previously with Everton - had accepted the role as chief executive officer from the start of next season.
"A few things have come together the past few months", Van Nistelrooy explained.
"The appointment of Marcel Brand as PSV's general manager and the conversation we've had were the final push I needed to make a conscious choice and take this step.
"PSV are ready to embark on a new path this summer and I am ready to play my part.
"We are ambitious and look to create something special in the long term. I am excited for the task in hand at PSV."
