Zidane has been given a contract until June 2022, just nine months after he resigned at the end of last season.
Zinedine Zidane has made a sensational return as coach of Real Madrid after Santiago Solari's sacking was finally confirmed on Monday.
Zidane has been given a contract until June 2022, just nine months after he resigned at the end of last season, having led Madrid to an historic third consecutive Champions League triumph.
Solari's dismissal was expected after three consecutive home defeats - to Barcelona, twice, and Ajax - deemed Madrid's season all-but over before the middle of March.
But Zidane coming back, with only 11 games left in La Liga and almost nothing to play for, is a surprise, particularly after he left on the incredible high of yet another European triumph.
"Real Madrid's board has decided to terminate Santiago Solari's contract as coach of the first team," read an official statement on Monday.
"Real Madrid appreciates the work done by Santiago Solari and the commitment and loyalty he has always shown to this club.
"The board has also agreed to the appointment of Zinedine Zidane as the new coach of Real Madrid with immediate effect for the remainder of the season and the next three, until June 30, 2022."
Like Solari, Zidane had been in charge of Real Madrid's reserve side, Castilla, when he was promoted in January 2016. Madrid finished second that year before going on to win La Liga in Zidane's first full season in charge.
They were unable to repeat the feat last term and finished 17 points behind Barcelona but domestic disappointment was almost forgotten as Zidane again oversaw success in Europe, with a victory over Liverpool in the final in Kiev.
Immensely popular with most of the players, Zidane's appointment will almost certainly lift morale in the dressing room, following a week in which captain Sergio Ramos has reportedly argued with club president Florentino Perez and been involved in a training ground spat with Marcelo.
Gareth Bale was one of the few to suffer during Zidane's previous spell in charge, with the pair barely on speaking terms in the run-up to the Champions League final. Bale's future now appears in serious doubt unless their relationship can be quickly repaired.
The Welshman might have left last summer had Zidane stayed but instead it was Cristiano Ronaldo that departed and the Frenchman now takes over a team missing the Portugese's goals and in urgent need of reform.
Despite Madrid's dominance in the Champions League, there is ground to make up in La Liga, where Barcelona are on course to seal their eighth league title in 11 years.
Madrid sit 12 points adrift of Barca in the table despite a 4-1 victory over Real Valladolid on Sunday, which proved to be Solari's final game in charge.
Solari was handed a contract until 2021 after overseeing an improvement following the sacking of Julen Lopetegui in November.
But familiar problems, including a lack of goals and a leaky defence, resurfaced in February as a defeat at home to Girona was quickly followed by losses to Barcelona in the league and cup, and humiliation by Ajax in the last 16 of the Champions League.