Giampaolo hoping to bring good times back to Milan
The 51-year-old former Sampdoria boss replaces Gennaro Gattuso on a two-year deal reported to be worth two million euros ($2.2 million) annually.
"I worked really hard to get this chance," Giampaolo, who will take over on July 1, told Milan TV.
"Milan are the most successful and one of the most important clubs in Europe. This is a great opportunity for me.
"Milan's history speaks of a club that always sought the beauty in football and the aesthetics along with the result.
"I'm happy and motivated, the path will be long because you never finish building, but I am very happy to start this adventure."
Giampaolo replaces former Milan player Gattuso who quit last month after leading the club to a fifth-placed finish in Serie A.
Sporting director Leonardo also left the club with former players Zvonimir Boban and Paolo Maldini brought in as part of an overhaul at the cash-strapped seven-time European champions.
"I was struck by their seriousness, competence and passion," said Giampaolo of technical director Maldini and chief operating officer Bohan.
"They are top level figures and their passion is contagious."
Frederic Massara has also been appointed as club sporting director, arriving from league rivals Roma.
Giampaolo led Sampdoria to ninth-place last season having previously coached teams including Siena, Empoli, Brescia and Cagliari.
"At the start of my career, I'd lose to Milan often, but more recently achieved a few victories," he continued after Sampdoria beat Milan at the San Siro last March in Serie A.
"Playing at San Siro is always an exciting moment, as there's no coincidence it's called La Scala del Calcio.
"I consider it the most fascinating stadium in Italy."
Champions Juventus, Inter Milan and Roma have also had coaching changes with second-placed Napoli continuing under former Chelsea and Real Madrid boss Carlo Ancelotti.
"I think with the return of Maurizio Sarri (Juventus) and Antonio Conte (Inter Milan) along with the many talented coaches in Serie A, it'll be even more competitive than last season," added Giampaolo.
Owned by US hedge fund Elliott Management, AC Milan will have a tight transfer budget due to Financial Fair Play restrictions and are also in a legal battle with UEFA over whether or not they feature in Europe next season.
The club won their last Champions League title in 2007 and their 18th Serie A crown in 2011.