The 69-year-old, who becomes the country's oldest coach, will be assisted by Ruud Gullit. Advocaat will leave Turkish side Fenerbahce at the end of the current season to lead the national team for the first time since they reached the semi-finals of Euro 2004.
"I welcome the appointments of Advocaat and Gullit," Dutch football association (KNVB) technical director Hans van Breukelen said at a press conference.
Advocaat replaces Danny Blind, who was sacked in March after a 2-0 defeat in Bulgaria left the country fourth in their qualification pool midway through the campaign, six points behind leaders France.
The Dutch, World Cup runners-up on three occasions, are in danger of missing out on a place in Russia after also failing to qualify for Euro 2016.
Advocaat, the former Sunderland manager, has been given a contract running until the end of the World Cup next year, if the country qualifies. The KNVB will then appoint a new coach with a longer-term perspective.
"There were two scenarios. We opt for the longer term or we do everything that is possible to get to the 2018 World Cup. We chose the second scenario. It had to be a very experienced professional, preferably an authority," Van Breukelen added.
In his first spell in charge, Advocaat took the Netherlands to the quarter-finals of the World Cup in the United States in 1994, where they lost to eventual winners Brazil.
He has also had three stints as assistant coach, most recently briefly last year when he spent just three months working under Blind before leaving for Turkey amid much criticism of his decision.
Advocaat was reportedly not the first choice of the KNVB. According to local media Louis van Gaal, Ronald Koeman, Frank de Boer, Henk ten Cate and German coach Roger Schmidt all turned the job down.
Ten Cate, now coaching in Abu Dhabi, ran into a media storm last month after initially accepting the post but then changing his mind, saying in a statement that he felt he did not have the full support of the KNVB.
(Reporting By Nick Said; Editing by Keith Weir)
