Nuno, 40, leaves Primeira Liga club Rio Ave to sign a one-year contract with Valencia and has the option to extend his deal into a further year, "based on sporting achievements".
A statement published on Valencia's official website read: "Valencia have reached an agreement to contract Nuno Espirito Santo as manager through to June 30, 2015."
Nuno's greatest achievement in an 18-year playing career came in May 2004 as he helped Jose Mourinho's Porto win the Champions League trophy at the expense of Monaco.
He also played for Spanish clubs Deportivo La Coruna and Osasuna and has attracted fresh attention from Spain after guiding Rio Ave into both domestic Portuguese cup finals in 2013-14.
His side were, however, beaten by league champions Benfica in both games.
He will be presented as the new Valencia boss at 11am on Friday morning.
Nuno's predecessor Pizzi, who replaced Miroslav Djukic in December, was sacked on Wednesday, just seven months after taking over at the Mestalla.
The Argentinian coach was unable to turn around the team's fortunes in the league in a half-season in charge and could only lead them to finish eighth in the Primera Division, the club's worst league finish since 1998.
His side fared better in Europe, and were 30 seconds away from reaching the final of the Europa League, but were defeated by Sevilla on away goals thanks to a last-minute goal by Stephane M'bia.