It is Muscat's first head coaching role outside of Melbourne Victory, and comes one year after his exit from the A-League club where he also starred as a player.
The former Socceroo brought an end to his six-year stay as manager of Victory - the longest and most successful in the club's history - in May 2019, at the end of last season.
After some time off from football, he moved to Belgium and was hired by Sint-Truiden as a football analyst initially because UEFA didn't recognise his AFC coaching licence.
Once that got cleared up, the 46-year-old became a coach with STVV and will now step up as head coach. He replaces Slovenian Milos Kostic.
Belgium's top flight was brought to a premature end due to the COVID-19 pandemic, with Club Brugge declared champions.
STVV finished 12th on the 16-team table, and Muscat will prepare for next season which is due to start in August.
Muscat won the A-League Championship twice as a player (2006-07, 2008-09) and twice as a manager (2014-15, 2017-18).
As coach he also won the 2015 FFA Cup and was named A-League Coach of the Year in 2014-15.
In his playing days he earned 46 caps for the Socceroos, representing them at the 1997 FIFA Confederations Cup, 2000 OFC Nations Cup, 2001 Confederations Cup and 2005 Confederations Cup.
