The incoming new owners at QPR - a group fronted by Formula One magnates Flavio Briatore and Bernie Ecclestone - were keen to appoint an Italian.
They turned to De Canio after a bid to install former Palermo and Monaco boss Franceso Guidolin stalled.
"De Canio is fully aware of the high standards and objectives that the new management has set for the future of the club," said chairman Gianni Paladini.
"He is ready and eager to take up the challenge."
Paladini added: "We offered Mick Harford a role within the new set-up and we're disappointed that he turned it down.
"He has done a fantastic job and his contribution will never be forgotten.
"The club is going through a phase of total restructuring and for us, the appointment of Luigi de Canio is the first important step ahead in our long-term strategy."
