The decision was announced by New Zealand Rugby Union chairman Jock Hobbs today who said the Aucklander would be in charge for a two-year contract. That decision was unanimous from the NZRU board.
It follows a swift but detailed process with the job being advertised in the wake of the All Blacks World Cup semifinal exit.
The 57-year-old Henry was the Wales coach from 1998 to 2002, with a record of 20 wins, one draw and 13 defeats.
He also coached the Lions on the tour of Australia in 2001, a series the Lions lost 2-1.
'In the board's view, Graham Henry is the most qualified person to coach the All Blacks and achieve the very high standards we expect from them,' NZRU president Jock Hobbs said.
Once hailed as the Great Redeemer in Wales, newly appointed Henry is going back to basics to get the All Blacks back to the top of the rugby pile.
The former British and Irish Lions and Wales coach replaced John Mitchell as All Blacks coach and immediately set out his basic plan: Fix the line-out and fix the kicking game.
'Our line-out is a bit flaky, but the All Blacks coach can't get that right by himself in a short period of time,' said Henry.
'I look at our kicking too,' he said.'When I was playing everyone used to kick off both feet. Our kicking isn't great - a lot of our young backs aren't great kickers of the ball.'
His last two years with Auckland have brought him two NPC titles and the Ranfurly Shield, while he has also helped the Blues take the Super 12 crown.
In a interview with New Zealand TV, Henry admitted these faults, but believes that the New Zealand mindset will suit his coaching style.
'I think that style of play suits the New Zealand mentality. We have talented, skilful, athletic players who like playing a high tempo game,' Henry told TV3.
'We all have to work together: The high performance centre, the Air New Zealand NPC and Rebel Sport Super 12 coaches,' he said.
'We all need to work together to address the problems we have in the game.'