"I have been fortunate to taste some genuine success and be part of the development of some excellent players, who have the world at their feet this summer," Farbrace said in a statement.
"There is never a great time to leave an international set-up and despite what will be a fantastic summer for English cricket, the opportunity to shape the future of one of the game's biggest counties was too much to resist.
"It would have been tough for me to have turned down the opportunity once Warwickshire showed an interest in me."
Former wicketkeeper Farbrace will succeed Ashley Giles, who left Warwickshire to become managing director of England men's cricket last month.
Last year, Farbrace said he would be "thrilled" to take over as England coach when Trevor Bayliss leaves the job after the Ashes series.
He will work with head coach Jim Troughton, with Warwickshire back in the top flight of the county championship after winning the division two title last year.
(Reporting by Hardik Vyas in Bengaluru; Editing by Toby Davis)
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