"It is an honor and a great responsibility to once again represent Romania, just as I did as a player," Hagi said in a statement.
Hagi led the men's national team for a short period in 2001, but left after only four matches.
He now replaces former head coach Mircea Lucescu, who resigned on April 2 because of health problems. Five days later, the 80-year-old died, the BBC reported.
As a player, Hagi represented Real Madrid and Barcelona, among others, and he is considered Romania's best player of all time.
Hagi's contract covers the upcoming European Championship and World Cup qualifiers.
