Pressley, who played for the Sky Blues in the mid-1990s, has signed a three-and-a-half year deal at the Ricoh Arena after leaving Scottish Division One outfit Falkirk.
He led Falkirk to Scottish Challenge Cup success last season and has steered them to this season's Scottish FA Cup semi-finals, where they will face Hibernian.
Coventry development director Steve Waggott said: "We are absolutely delighted to welcome Steven Pressley to Coventry City as our new manager.
"We have, once again, undertaken a very thorough process since the departure of Mark Robins to identify the number one candidate for the job and we are thrilled that Steven is joining us.
"He's a hungry and highly ambitious young manager and we have all been very impressed with him and his record so far.
"We wanted someone who could come in and hit the ground running because we have 10 very important games left this season. But we also wanted somebody who would take us forward into the future and prioritise youth development and the club's role in the community.
"Steven ticked every single box and I know everyone at Coventry City - from supporters to staff - will get right behind him.
"We would like to thank Falkirk for the way they have handled the situation. I know exactly what it is like to get a call like the one I made to their chairman - and it's not very nice!"
Pressley, who was capped 32 times by Scotland, began his playing career with Rangers and signed for City in 1994.
He moved back to Scotland with Dundee United in 1995 before joining Hearts, where he also had a short spell as caretaker manager.