The 51-year-old replaces Dutchman Frank De Boer, who was sacked a week ago following a 1-0 defeat at Sampdoria, Inter's fifth loss in 11 outings.
Inter, taken over in June by new Chinese owners, are struggling this season and are sitting ninth in Serie A and last in their Europa League group.
Pioli's last job in management was as head coach of Lazio, where he was sacked back in April after two years at the club.
Inter were also rumoured to be interested in appointing former Villarreal boss Marcelino as manager but have opted for Pioli.