Neville has been working as a coach in the England national set up under manager Roy Hodgson, and he is expected to continue in his role.
“I am absolutely thrilled to be given this opportunity with Valencia,” Neville told the club’s official website.
“Valencia are a huge football club of immense standing and I know from my time as a player the passion and dedication of the Valencia fans.
“I am really looking forward to working with the club’s talented group of players and am excited about the challenge ahead.”
His first game in charge of the club will the Champions League encounter against Lyon on Wednesday.
Gary’s younger brother Phil Neville was named the co-caretaker boss of Los Che following the sacking of former manager Nuno Espirito Santo last week. His new role with the club is yet to be confirmed, but he will take charge of the upcoming home game against Barcelona.