Espanyol said Rubi, 49, had paid a release clause to leave the Catalan club. He replaces Quique Setien, whose departure from Betis by mutual consent was announced in May after a two-year tenure.
Former midfielder Gallego was previously in charge of the reserve team at Espanyol.
Seville side Betis ended the season 10th and three points behind seventh-placed Espanyol, who took the final Europa League qualification berth.
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(Reporting by Alan Baldwin in London, editing by Christian Radnedge)
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