Stoney, 36, takes charge of the newly-formed team who were last month granted a licence to play in next season's second-tier Championship. United have not fielded a women's team since 2005.
"I am delighted to have joined Manchester United. This the biggest club in the world," Stoney told United's website http://www.manutd.com.
"The fact that we are going to have a women's team and I'm going to be able to introduce that from scratch, to build a team, build a philosophy, with the biggest club in the world, means that, for me, there is no more exciting opportunity."
The former defender hung up her boots in 2016, having played for Arsenal, Chelsea and Liverpool among others over her 18-year career.
She won four FA Women's Cups and amassed 130 caps for England, featuring at three World Cup finals. Stoney was most recently part of Lionesses manager Phil Neville's backroom staff.
"Appointing Casey shows the desire we have to succeed and her experience and knowledge of the game, both as a coach and as a player, made her a stand-out candidate for the role," executive vice chairman Ed Woodward said.
"... (She) is a proven leader as a coach and having captained many of the sides she has played for, she brings a positive and winning mentality which will be a huge benefit to the team."
The 2018-19 season will begin on Aug. 18, with the opening round of fixtures being the Continental Tyres Cup, before the league gets underway on Sept. 8.
(Reporting by Christian Radnedge, Editing by William Maclean)
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