The 61-year-old, who was most recently in charge of League One outfit Colchester, was previously at Rovers for a three-year spell from 1993 to 1996.
The Pirates acquired Ward after sacking Mark McGhee on Saturday following a 4-1 defeat at York, which left them with just one win in their last 11 games and 23rd in League Two.
Chairman Nick Higgs told the club's official website: "Initially, John's contract will be until the end of the current campaign, but it is the intention to extend his contract, with the agreement of both parties at the end of the season.
"It is vitally important that we bring somebody to manage the club that has Rovers connections and understands the Bristol Rovers values and John is the perfect candidate for this role.
"Hopefully, under John Ward's guidance, we will return the pride to our club which has clearly been lacking on the pitch for the past few years, and to this end, I ask the players, staff and fans to get behind John and help him take us forward."