The 42-year-old replaces Dick Advocaat, who had previously stated his intention to step down at the end of the season if PSV failed to win the league title.
With the club finishing as runners-up and seven points adrift of Ajax in the standings, the former Holland coach is stepping aside to give Cocu the chance to lead the club once more.
Cocu spent three months as PSV's interim coach at the end of last season following the dismissal of Fred Rutten, before Advocaat then came in to take over the reins.
At a press conference this morning, general manager Tiny Sanders said the appointment of Cocu will signal a shift in focus from instant success to bringing through young players and building a team for the future.
"PSV and Phillip Cocu have agreed a four-year contract as head coach," he said.
"This expresses the intention to build a new PSV with the involvement and appearance that characterises the club.
"Both parties see the selection of Phillip Cocu, after a good debut as interim coach, as the right choice.
"After focusing on the championship in 2013, partly fuelled by the return of Dick Advocaat, we are now aiming to implement a long-term vision.
"Extra attention and investment will be made in our youth system...while individual training and guidance and a recognisable style of play at all levels are important examples of our priorities.
"Qualification for the Champions League this year is a great windfall but is secondary to the priorities previously mentioned.
"PSV would like to thank Dick Advocaat for his hard work in the 2012/13 season and wish him every success in his future challenges.
"He was willing to show his loyalty and was the same passionate man with a warm heart as he was during his first spell in charge, so we are very grateful."(reopens) Cocu will be joined by assistants Chris van der Weerden and Ernest Faber.
The former Oranje international said: "We are all eager to start. This is a challenging job with an ambitious new staff.
"We are going to build a new team. There will be changes in the squad. PSV will always go for the title but there is time enough.
"I am someone who likes to learn step by step and don't want to go too fast. I also think you're never too old to learn.
"I'm ready to take this step. It is a long-term thing but I am someone who, if he start something, wants to do well."