The former Celtic defender has left his role as a youth coach at Everton to take the job.
He replaces Terry Butcher, who was sacked following Hibs' relegation from the Premiership last season.
"To be given this opportunity with Hibernian is a great privilege and a real honour - it is a massive club with huge potential," said the 42-year-old.
Stubbs has been appointed on a two-year contract and will be hoping to lead the Easter Road side back to the top flight at the first attempt, with Edinburgh rivals Hearts and Rangers also in the second tier next term. A decision has yet to be made on his assistant.
"I'm excited about the future here at Hibernian and what we can all achieve together at the club - this is the start of the journey," he added.
"The Scottish Championship will be a tough division, but I'm confident that if we approach the challenge with enthusiasm, optimism and belief then we can achieve success.
He is a driven, intelligent and strong-minded character, who has a very clear vision about what he wants to achieve in football
"I've been at Everton for almost six years and now I believe I'm ready to take on the role of head coach here at Hibernian."
Hibs chief executive Leeann Dempster revealed her delight at the appointment, insisting the Englishman shares her vision for the club.
"There were strong candidates who applied for the position but after much consideration, Alan emerged as the standout choice," she said.
"It's important that the CEO and head coach are very much on the same page and that they forge a close working and trusting partnership. I spoke with Alan and it became apparent early in the discussions that we had a common goal.
"He is a driven, intelligent and strong-minded character, who has a very clear vision about what he wants to achieve in football - producing positive results, playing attractive football and developing young players.
"All those attributes fitted the criteria we required and we're confident Alan is the right man to unite the club and bring success to Hibernian.
"Alan will be our head coach and that is part of the new structure in place at the football club; a continental-style model designed for continued long-term success."

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The 31-year-old won the 13.1-mile race in 59 minutes, 32 seconds, to knock 20 seconds off the record set 14 years ago by Spain's Fabian Roncero.
Farah, also world champion at 5,000m and 10,000m, beat Kenya's Micah Kogo.
The world record of 58:23 was set by Eritrea's Zersenay Tadese in the 2010 edition of the Lisbon race.
Farah's only world record is the two-mile indoor mark he set at the Birmingham Grand Prix last month.
He clocked a time of one hour exactly in winning 2014's Great North Run, becoming the first British man to win the North East's famous half marathon for 29 years.
Kenya's Kogo, the 10,000m bronze medallist from the Beijing Olympics in 2008, was one of six men lining up against Farah to have already run under 60 minutes for the distance.
There was also British success in the wheelchair races for David Weir and Shelly Woods who continued their preparations for next month's London Marathon, which also doubles as the IPC World Championships.
Weir beat Swiss rival Marcel Hug in a photo-finish while Woods got the better of British rival Jade Jones.

Broady and Watson struggled to make an impact in their first final as a pair with the top seeds from Chinese Taipei winning in just over an hour.
It is the Chan siblings' third trophy of the year.
Watson suffered a second-round singles defeat by Caroline Wozniacki, while Broady failed to get past round one.
The 26-year-old was beaten 6-2 6-2 by British top seed Johanna Konta.
"I want to thank my partner," Broady, who reached the women's doubles third round at Wimbledon with Watson this year, told BT Sport.
"We've been best friends since we were about nine years old so to arrive at a final together on the same side of the net is just awesome, and I really enjoyed playing with her."
Alan Stubbs has been named the new head coach of Scottish Championship side Hibernian.
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Double Olympic champion Mo Farah has won the Lisbon half marathon in a new European record time, becoming the first Briton to break 60 minutes.
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British pair Naomi Broady and Heather Watson lost 6-3 6-1 to Chan Yung-jan and Chan Hao-ching in the doubles final of the Hong Kong Open.