Having parted ways with Ian Baraclough in October, O'Neill quickly emerged as the favourite to return to the dugout at Windsor Park.
The 53-year-old has been out of work since he was sacked as boss of Stoke City, the job that he initially took when he left his first stint with Northern Ireland.
That spell with the Green and White Army officially ended on April 2020, but O'Neil has been chosen to lead the country into a new era.
To mark their commitment, the respective parties have agreed to a five-and-a-half year contract, O'Neill tasked with galvanising a squad which under-performed under Baraclough.
Despite his familiarity with the nation's players due to his period with the Under-21s, Baraclough only posted six wins from 28 matches.
Northern Ireland only narrowly avoided relegation to the fourth tier in their most recent UEFA Nations League campaign, and first on the agenda for O'Neill will be improving their fortunes in Euro 2024 qualifying.
On paper, they have been drawn in a favourable group which features Denmark, Finland, Slovenia, Kazakhstan and San Marino.
Speaking on O'Neill's appointment, Irish FA president Conrad Kirkwood said: "I believe Michael is the right man for the job. He comes to the role this time with the benefit of even more experience at both international and domestic level, which will have only added to his skill set and experience.
"With a positive Euro 2024 qualifying draw I have no doubt the Green and White Army will get behind him and his team."
During his first reign, O'Neil recorded 26 wins and 28 defeats from his 72 matches in charge, as well as guiding Northern Ireland to the last 16 of Euro 2016.
His first match upon his return will be an away encounter in San Marino on March 23.