The Kerala team, co-owned by retired Indian cricket great Sachin Tendulkar, finished second in the inaugural ISL last year.
"ISL inaugural season was a huge success and I’m sure it will get better and better," Taylor, the former Leicester City manager who led England for one game against Italy in 2000, said in a club statement.
"Kerala has a strong legacy in Indian football and I am looking forward to working with the team and share the passion for football with the fans," said the 56-year-old who also coached the Bahrain national team.
Co-owned by Spanish club Atletico Madrid and former India cricket captain Sourav Ganguly, Atletico Kolkata won the inaugural edition of the eight-team league.
Brazilian great Zico coached the Goa team and participating players included Italian World Cup winners Alessandro Del Piero and Marco Materazzi and former Arsenal midfielder Robert Pires.
(Reporting by Amlan Chakraborty in New Delhi; editing by Ed Osmond)
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