The club will announce on Thursday that the A-League championship-winning coach will take charge of the team for the next three seasons, The Australian reported.
Arnold replaces Frank Farina, whose contract was not renewed after the Sky Blues finished sixth in the championship, bowing out of the finals in the first week.
Arnold, who led Central Coast Mariners to the 2013 championship, relinquished his position with J.League side Vegalta Sendai last month.
Arnold last week knocked back Newcastle Jets' offer reported to be $750,000 a year.
The Jets have since appointed Phil Stubbins.
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