Bilic's task will be to steer Croatia to qualification for the 2008 European Championships.
Croatia's qualifying group includes England, Russia, Israel, Macedonia, Estonia and Andorra, prompting Bilic to say: "We face a tough bumpy road, but we're not afraid."
Bilic joined West Ham from German club Karlsruhe for £1.3m in February 1996.
He spent just over a year at Upton Park before joining Everton in May 1997 for £4.5m.
After a three-year spell at Goodison Park he returned for a second spell at Hajduk Split where he began his career.
Bilic was roundly castigated for a piece of play-acting which got Laurent Blanc sent off in the 1998 World Cup semi-final, causing the France defender to miss the final.