Knill will be in charge of the struggling League Two side until the end of the season while Martin Ling is absent on long-term sick leave - he has been away from the side for nearly a month.
The 48-year-old has been out of work since leaving Scunthorpe in October 2012 and he has plenty of lower league experience in spells with Rotherham United and Bury.
Knill was in the crowd on Tuesday when Torquay went down 1-0 at fellow strugglers Aldershot, a result that leaves them perilously placed five points above the relegation zone ahead of the visit of second-placed Port Vale on Saturday.
"Alan was suggested to us by some people in the football industry," said Gulls chairman Simon Baker.
"We had drawn up a shortlist and we checked up on Alan with people he had worked with, and they all gave him a glowing reference.
"We met him at Aldershot and we are delighted he has decided to come in and help us. He comes across as a very agreeable man but there is an edge of steel in him, which is what we need.
"He also has very good contacts and during his time with Bury, he built up a good relationship with Manchester United and Everton. It would be no surprise to see some loan players come in to help us out.
"The last I heard from Mrs Ling was that Martin is making progress and we will see how it all pans out. We will cross that bridge when it comes but our focus at the moment is between now and 27 April, when the season comes to an end."