Blanc, who had been out of work since being fired by Lyon last September, will be reunited in Jeddah with one star from his 2012 Euro squad Karim Benzema.
After the team finished fifth in the Saudi league last season, the 36-year-old striker, the club's star recruit, reportedly campaigned for a French-speaking coach.
This prompted the resignation of club president Louay Nazer, who had reportedly reached an agreement with Italian Stefano Pioli, who had left AC Milan.
The Al-Ittihad squad also includes N'Golo Kante, a starter in the France team that reached the last four at the current Euros, and former Monaco and Liverpool Brazilian Fabinho.
The 58-year-old Blanc was at the heart of the France defence as they won the 1998 World Cup and Euro 2000.
In his second season as a manager he led Bordeaux to a League 1 title. He coached France from 2010-12.
He guided Qatari-own Paris Saint-Germain to three Ligue 1 titles and five domestic cups between 2013 and 2016, had a stint in Qatar with Al-Rayyan from December 2020 to February 2022 and a painful 11 months from October 2022 when he was unable to reverse Lyon's decline.
Al-Ittihad have not specified the length of Blanc's contract.
He will be the club's third coach in a year following Nuno Espirito Santo, who led the club to a ninth Saudi title in 2023, and Marcelo Gallardo.
Last season the club finished only fifth in the table, 42 points behind runaway champions Al-Hilal. They failed to qualify for the Asian Champions League.
Argentine Gallardo, who dropped the misfiring Benzema for a time, was fired in July after less than seven months in the job.
