Scholes, 44, is taking on his first managerial role, signing a contract with the club he supported as a boy after spending his entire playing career at Old Trafford.
The former Premier League club are languishing in mid-table in League Two, the fourth tier of the English game.
"Oldham Athletic are delighted to announce footballing legend Paul Scholes as the new first-team manager on a one-and-a-half-year-deal," the club said in a statement.
"I couldn't be any happier at the minute," Scholes told Oldham's official website. "It's been a while. Obviously there's been talk of it when I finished my (playing) career.
"It wasn't something I was quite ready to do and there's obviously been three or four times over the last six years where it could have happened and I've not been quite ready."
Scholes, a member of Manchester United's famed "Class of '92" alongside David Beckham and Ryan Giggs, said he wanted to entertain Oldham's fans.
"I want my team to be aggressive and focused on winning first and foremost," he said. "I know it's not going to happen every week, but I go into every game expecting to win."
Oldham owner Abdallah Lemsagam said: "Paul has won everything there is to win in football.
"He is a man who will bring a lot of footballing knowledge and his hunger to succeed in management will be there for everyone to see."
Manchester United wished Scholes luck, saying in a message on Twitter: "Best of luck to Scholesy in his new role as first-team manager of @OfficialOAFC!"
United caretaker manager Ole Gunnar Solskjaer, preparing his team to face Paris Saint-Germain in the Champions League last 16 on Tuesday, wished his former team-mate luck.
"Watch the pundits because he's been asking for it," joked the Norwegian, referring to Scholes's outspoken comments as a TV critic.
"It's fantastic to have Scholesy back in the game because he was a fantastic player to play with, great personality. It's a challenge for him.
"I know it wasn't what he thought he was going to do when he was a player. But that drug of football when you don't get it, Paul is one of them, he loves football."
Scholes, who owns a stake in non-league Salford, will step down from his role as director of the National League club, who could be in competition with Oldham next season if they win promotion from the fifth tier.
The English Football League gave Scholes the go-ahead to join Oldham last week, ruling that there was no conflict of interest.
He will take charge of his first match against Yeovil at Oldham's Boundary Park ground on Tuesday.