Bilic replaces Argentine Ramon Diaz, who was sacked after two games of the current season.
"The contract was signed today in New York... the board wished Bilic all success in his new mission to help Ittihad regain its outstanding performance," the twice Asian Champions League winners said on Twitter.
Al Ittihad have won the Saudi Pro League eight times but their last title came in 2009. They are second from bottom in the 16-team competition following three defeats and a draw.
(Reporting by Shrivathsa Sridhar in Bengaluru; Editing by Christian Radnedge)
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