"This is an incredibly exciting and historic day for our club,” Atlanta United owner Arthur Blank said in a statement.
Martino, who also guided Paraguay to the World Cup quarter-finals in 2010, said he was looking forward to the "challenge of leading a team in an evolving league".
Atlanta and Minnesota United FC will join MLS for the 2017 season, expanding the league to 22 teams.
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In keeping with the North American sports business model, MLS does not have a promotion-relegation system.
(Reporting by Andrew Both in Cary, North Carolina,; Editing by Neville Dalton)
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