The former England, Manchester United, Liverpool, Inter Milan, West Ham, Middlesbrough and Wolves midfielder has signed a rolling annual contract.
Ince has not managed since he left Notts County almost two years ago, having previously managed Blackburn Rovers, MK Dons and Macclesfield.
“It’s great to be here. Considering I’ve watched the team play for the last 14 months, it’s strange sitting here as the manager, having obviously watched Blackpool as a fan as well as watching my son play," Ince said in a statement.
"I’m over the moon though and delighted, it’s great to be back on the training ground and great to be involved with, and in charge of, a great bunch of lads.
“I’ve worked with a lot of players and the spirit and togetherness of the lads is absolutely fantastic. I’m glad I’ve been given the opportunity by Karl Oyston.”
The former England international sat in the directors' box at Portman Road for the Seasiders' 1-0 defeat at Ipswich, and has been a regular attendee to watch his England U21 international son play.
Caretaker boss Steve Thompson had been in interim charge since Michael Appleton left for Blackburn on January 11 and revealed he hoped to remain to help Ince on his return to management.
"It's something I want to do," he said. "It's quite difficult stepping in as number two. As much as you try and do things right, you always know that this time next week you might have your arm round a new manager as his assistant.
"I'll just have to see what happens. I think Paul wants me to work with his team. I'll keep my head down and work as hard as I can for him, but further down the line, I want to be number one."