The former Tranmere and Ipswich defender has replaced Kevin Keen, who left last week after it was confirmed that the club will be relegated to League Two.
McGreal follows Joe Dunne and Tony Himes, as the third boss to step up to the first team having previously worked with the youth team.
He told the club's official website, "It's obviously a negative to get relegated, but I think it's a great time to come in and get Colchester United moving in the right direction again,"