The 59-year-old, who had been offered a four-year contract by the Turkish Football Federation (TFF) to return to the post he has held on two previous occasions, will train the national side for their remaining four World Cup qualifiers.
Terim, who decided not quit his club job after a meeting with Galatasaray chairman Unal Aysal, will leave the national team at the end of the season in May.
"We allowed Fatih Terim to manage the national team for the remaining four games in the qualifiers," sports channel NTV Spor quoted Unal Aysal as saying.
Terim, who coached Turkey from 1993-96 and 2005-09, replaces Abdullah Avci who stepped down by mutual consent following a disappointing qualifying campaign.
Turkey are fourth in European Group D with seven points from six matches, 11 points behind leaders The Netherlands and four short of second-placed Hungary with slim chances of reaching the finals in Brazil next year.
(Writing by Ece Toksabay; Editing by Rex Gowar)
