The 45-year-old Reim, who won 157 caps from 1992 to 2009, has coached the Baltic country's under-21 and under-23 teams and will now steer their World Cup qualifying campaign.
Estonia lost 5-0 to Bosnia in their first Group H match and will host Gibraltar in their next qualifier on Oct. 7. They will also face group favourites Belgium, Greece and Cyprus.
They have never reached the finals of the World Cup or European championship and failed to qualify for Euro 2016 after finishing fourth with three wins, one draw and six defeats.
The 40-year-old Pehrsson, who was appointed in December 2013 after a career of managing clubs in Scandinavia, left by mutual consent with a record of 11 wins, eight draws, and 14 defeats.
Two of Reim's ex-international team mates, Andres Oper and Mart Poom, have been appointed as assistant coaches along with Janno Kivislid, the Estonian FA said.
(Reporting by David Mardiste; editing by Ken Ferris)
