The move, widely rumoured, has been confirmed by the Brazilian Confederation of Basketball (BCB), who have already started planning for the 2016 Olympics, when the Games will be held in Rio de Janeiro.
Magnano's initial contract will be until the Americas Championships in 2012, which is the qualifying tournament for the London Olympics, although that would be extended if he successful.
The 55-year-old declared said it was "great challenge and an honour" to be in charge of Brazil, while highlighting the quality of the country's players, both home and abroad.
Magnano replaces Spanish Moncho Monsalve, who had led the team since 2008, and helped Brazil to get the gold medal at the Americas Championship last year and qualify for the 2010 World Championship in Turkey.
But he has had to quit due to health problems.
Nevertheless, the President of the BCB, Carlos Nunes, was delighted to have replaced him with Magnano, one of the most successful coaches of recent years.
In 2002 his Argentinian team won the silver medal at the World Championship title in Indianapolis and then two years later led them to the Olympic gold medal, when they beat Italy 84-69 in the final having beaten the defending champions United States 89-81 in the semi-final.
Nune said: "He is a great coach and will be able to adapt easily to our style of play.
"The contract will be in principle to the Olympic Qualifying 2012 and may extend up to the Olympics in Rio de Janeiro in 2016."
Magnano's coaching career started in 1991 and he has been successful both domestically and internationally, winning 20 major titles, including four Argentinian Championships with Atenas Córdoba and four South American titles with the same club.
Brazil have been drawn in Group B of the World Championships alongside Germany, Iran, Tunisia, Croatia and Slovenia.
If they get through to the next stage they could meet Argentina.
Brazil's basketball team have competed in the Olympics 13 times, winning the bronze medal three times, including in 1948, the last occasion the Games were held in London.
But they have failed to qualify for the Olympics since Atlanta in 1996, when they finished sixth.