The former Scotland, Hibs, Rangers, Birmingham and Aston Villa boss begins work today and will take charge of tomorrow's npower Championship encounter with Crystal Palace at the City Ground.
The 53-year-old had been out of work since being dismissed by Villa in May, after finishing just two points above the relegation zone in the Premier League.
"I'm really looking forward to working with Nottingham Forest," said McLeish, who was appointed Rangers manager in December 2001 from Hibs and won two SPL titles, two Scottish Cups and one League Cup before departing in May 2006.
"I've had time away from the game and now feel refreshed and ready to go.
"The fact that a club of Forest's magnitude has offered me a job excites me greatly – it's a wonderful opportunity.
"I can't wait to get started and I'm looking forward to meeting the players, talking to them and taking my first training session."
Forest chairman Fawaz Al Hasawi said: "I'm delighted to welcome Alex to our club and look forward to working with him.
"Alex took Birmingham to promotion from the Championship and has great experience of working in the Premier League.
"He's hungry for more success and I believe he's the man who can help us fulfil our ambition of making it to the Premier League."