Busch, who was the assistant coach on the US teams at Athens in 2004 and Beijing in 2008, replaces Mark Schubert, who was controversially relieved of his duties in November.
Busch, a coach for 22 years at the University of Arizona, is due to officially begin in May just two months before serving as US women's team coach at the World Championships in Shanghai and only 14 months ahead of the 2012 London Olympics.
Busch said "absolutely not" when he was asked whether he would set any medal targets for London 2012 for a team that finished top of the table in Beijing in 2008 with a total of 31 medals, including 12 gold.
"My expectations are to focus on the process of what we'll do to get to that place to achieve the best and highest success we can," said the 59-year-old Busch, the 1998 United States swimming coach of the year.
"I really don't foresee any major changes.
"Mark did a tremendous job and I've known him a long time.
"He's a good friend.
"Very few people have contributed as much to the sport as he did."
Busch's contract, which begins after the US college season ends, runs through until the 2016 Olympics in Rio de Janeiro.
Busch's title is different to that of Schubert, who was called the head coach.
"We thought it was best to rename the title to national team director, but [with] no real change to the overall scope and nature of the position," USA Swimming President Bruce Stratton said.
USA Swimming executive director Chuck Wielgus praised Busch for his character as well as coaching skills, which have helped launch the careers of 34 US Olympic swimmers, and claimed he will provide leadership and vision.
"Frank Busch's accomplishments are extraordinary, but equally important is the fact that he is a person of impeccable character and highly respected by athletes and coaches," Wielgus said.
"He will represent our sport and our country in a manner that will give us all great pride."
November 2010: Schubert fired as head coach by USA Swimming
November 2010: US swim coach set to be replaced for London 2012