"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.
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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