The Black Cats lie bottom of the Premier League and sacked Paolo Di Canio in September after only 13 games.
"I look forward to proving my ability to the fans - I want them to believe because we need to stick together," Poyet, 45, told the club website.
He will be joined by his Brighton backroom team of Mauricio Taricco and Charlie Oatway.
"I think the key behind my strong home record at Brighton was the connection with the fans - I can see that here," added Poyet, who wasdismissed by the Seagulls in June.
"It's a huge challenge but one I am excited about and I am grateful for the opportunity to manage in the Premier League."
The former Uruguay international becomes Sunderland's sixth manager in five years.
"We analysed a wide range of candidates and believe that Gus's track record, experience, commitment and passion make him the right man to take us forward," said chairman Ellis Short.
Sunderland's senior professional development coach Kevin Ball had been in temporary charge of the club since Di Canio was relieved of his position following a player revolt at the club.
Ball, 48, had asked to be considered for the job, but said following the Wearside club's 2-1 defeat by Manchester Unitedon Saturday he did not expect to be doing another post-match news conference any time soon.
Ex-Chelsea and Tottenham player Poyet, who was capped 26 times by his country, started his coaching career in England in 2006 as assistant to Dennis Wise at Swindon Town then Leeds United.
He joined Spurs as first-team coach after one year at Elland Road, later becoming assistant manager to Juande Ramos.
Source: BBC
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