Lennartsson, who blooded many talents from the west coast club in international football during a successful five-year period in charge of Sweden's Under-21 side, said it was "one of the most honourable jobs" in the Scandinavian game.
"It feels incredibly stimulating to take this on," the 49-year-old said in a statement. "With its history, its loyal and engaged supporters and its sporting goals, IFK Gothenburg is something all Swedish football coaches dream of."
Despite being linked to a number of other coaches, the club said Lennartsson, who had taken a year's sabbatical following his sacking by Elfsborg in September 2013, was always their top choice to replace Mikael Stahre, who was fired at the beginning of November.
"We have signed a three-year agreement with the coach who has always been our first choice since it became clear that the club and (previous coach) Mikael Stahre were to go their separate ways," sporting director Mats Gren said in a statement.
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IFK Gothenburg finished second in this season's Allsvenskan, six points behind Malmo, with the last of their 18 championship wins coming in 2007.
(Reporting By Philip O'Connor; editing by Toby Davis)
