The 44-year-old Sousa was a former Portugal midfielder and manager of English clubs Queens Park Rangers, Swansea City and Leicester City.
He left Switzerland's Basel last week after one year in the job.
"Fiorentina is delighted to announce that an agreement has today been reached with Paulo Sousa for him to become the new first-team coach," Fiorentina said in a statement on their website.
"Sousa will be in Florence tomorrow to complete the formalities."
Sousa, who won the Champions League as a player with Juventus and Borussia Dortmund, replaced former Italy striker Vincenzo Montella.
Montella was sacked by Fiorentina earlier this month after leading them to fourth place in Serie A last season.
(Reporting by Ed Osmond, editing by Pritha Sarkar)
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