He replaces Ricardo Gomes, who was fired on Wednesday with the team languishing in the bottom half of the Brazilian top flight.
Ceni, 43, played more than 1,200 games for Sao Paulo -- a record -- after joining in 1990 and, remarkably, scored 131 goals.
He scored 69 of his goals from penalties and 61 from free-kicks, as well as one from open play.
His tally is a record for a goalkeeper and also puts him 10th on Sao Paulo's all-time list of leading scorers.
He retired last December and has since been working towards becoming a coach.