The 41-year-old French World Cup victor, who had been working as an assistant to Belgium coach Roberto Martinez since 2016, returns to the club where he began his professional career.
This is Henry's first foray into management and he will soon leave from the role of second assistant coach of the Belgium national team under Roberto Martinez.
Monaco have appointed Thierry Henry as their new head coach, with the Frenchman replacing Leonardo Jardim.
Henry knows Monaco well having graduated through the youth system and played for the Principality club between 1993-99.
Whilst Monaco may not be in the same calibre as those clubs, their run to the semi-finals of the Champions League just two seasons ago and their overcoming of PSG to win their first Ligue 1 title since the 1999/2000 season just two terms ago proved the potential which still exists within the club.
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Henry is also his France's leading scorer with 51 goals and won the World Cup in 1998 and European Championship in 2000 with Les Bleus.
"Firstly, I'd like to thank Monaco for giving me this opportunity to coach the team, which is really special for me", he said.
He retired as a player in December 2014 to work as a television pundit, before joining Belgium's coaching staff in 2016.
Vadim Vasilyev, Monaco's chief executive, added: 'His knowledge of football, his passion for the game, his high standards and his commitment to our colors make his nomination a reality.
Henry's backroom team will comprise of Kwame Ampadu, father of Chelsea star Ethan Ampadu, who worked with Henry during their time coaching together at Arsenal's academy, as well as Benfica Under-23 coach Joao Carlos Valado Tralhao.