McInnes, a former Burnley target as a player, appeared to be the number one target almost from the moment Keith Millen left, and he has fought off competition from former Rotherham and Barnsley boss Mark Robins for the job.
McInnes will be joined by Tony Docherty, his assistant from St. Johnstone, and Bristol City chairman Colin Sextone said:
"We're delighted to welcome Derek and Tony to Bristol City FC.
"Throughout this process we received applications from a host of very strong candidates but in the end Derek stood out above all others.
"Derek was the unanimous choice of the board of directors and majority shareholder. He's an impressive character who is very highly-rated in the game and comes here on the back of a superb stint at St. Johnstone.
"His passion, his great track record; he's a manager on the up with a real understanding of the game. Derek has the drive and energy that proved to us he was the right man to take the club forward, both in the short-term and - even more importantly - in the medium to long-term.
"I'm sure our supporters will give Derek their full backing, starting this Sunday for our home game with Birmingham City, as we begin a new era and strive to move up the Championship table and beyond."