The 42-year-old, who is also No.2 to Republic of Ireland boss Martin O'Neill, will work alongside Paul Lambert as the pair attempt to revive Villa's fortunes after a difficult 2013-14 campaign.
Keane said: "I am delighted to be joining Aston Villa and I look forward to what promises to be an exciting challenge."
He added: "I am grateful to both Villa and the Football Association of Ireland for making this happen, and I would like also to thank Martin O'Neill.
"I am relishing the prospect of linking up with Paul Lambert and combining both roles to the full advantage of both Villa and Ireland."
Former Celtic skipper Lambert, whose staff was ripped apart earlier this year when assistant Ian Culverhouse and football operations manager Gary Karsa were suspended and then sacked for unspecified disciplinary reasons, was delighted to have landed the former Manchester United skipper and Sunderland and Ipswich manager after a delicate process of negotiation.
He said: "Roy has a great knowledge of football, on the coaching side as well, and he'll be a great asset and a big help to everybody here at Aston Villa Football Club.
"I'm really looking forward to working with him and I'm delighted that he's here.
"As a player, he was one of the most accomplished in the history of the Barclays Premier League, and he's brought that experience gained over many years into his career in coaching and management. The players will love working with him.
"Although we never played together, we competed against one another and he's someone for whom I have a lot of time and respect.
"He has worked under some great managers, some of the most successful in the game, and he'll be a great help to myself as well.
"Roy brought Sunderland up out of the Championship and into the Premier League, he gained further experience at Ipswich - where we were close rivals while I was manager at Norwich - and he's now working at international level as assistant manager with the Republic of Ireland.
"All of that experience and knowledge, along with the qualities he has as a long-standing, leading professional in the game means he will bring a lot to the table. We're delighted to have him here."
Keane, who will take up his role on Monday as Villa's players return to their Bodymoor Heath training ground for the start of pre-season, had been working as a television pundit following his exit from Ipswich in January 2011 when O'Neill handed him a chance to return to the game in November last year.
He has clearly enjoyed his time back in the Ireland set-up and after holding initial talks with Celtic in May over their managerial vacancy, decided to stay where he was.
However, O'Neill was convinced that, having raised his profile once again, Keane would receive further offers, and news of Villa's interest emerged within days.
The club and the FAI have since managed to thrash out an arrangement suitable to all parties, and Keane will embark upon his Villa duties with O'Neill's blessing.
The 62-year-old said: "This is a good arrangement for us that allows Roy to remain in position as my assistant manager.
"Since he started in November, Roy has been excellent with the players and I have no doubt that he will bring all of the positive attributes he has shown here to the role he takes on at Aston Villa with Paul Lambert."
John Delaney, chief executive of the FAI, added: "We met with Martin and Roy to discuss retaining Roy's on and off-the-field responsibilities with the Irish team and becoming assistant manager at Aston Villa.
"Both Martin and I have spoken to Paul Lambert and we are comfortable that this agreement will work well for us and the Irish team."