The role had become vacant following Gennaro Gattusos decision to resign after the club failed to secure Champions League football by a single point.
Milan have now turned to Giampaolo, a move widely expected to happen after the Italian terminated his contract with Sampdoria following three years in charge of the Serie A outfit.
Having grown impatient with his former clubs unwillingness to push on and spend money in the transfer market, I Rossoneri now provide the perfect platform for the 51-year-old to hone his skills as a football manager.
"AC Milan announces the appointment of Marco Giampaolo as the new coach of the First Team with effect from July 1st 2019," read a statement on the clubs official website.
"The agreement runs until 30 June 2021 with an option to extend the contract to June 2022. Marco Giampaolo will now coach AC Milans First Team on the first day of the new seasons training at Milanello on July 9th."
Starting his career as assistant coach at Pescara in 2000, Giampaolo earned his coaching license in July 2007, going on to coach a number of Italian sides.
Cagliari, Siena, Catania, Cesena, Brescia and Empoli are listed among his former employers, but the project on hand at Milan poses the biggest move in former midfielders career.
Last season he led Sampdoria to a ninth place finish in Serie A, building upon the two seasons prior where he had secured consecutive tenth place finishes.