“Wayne is a born winner,” Blues co-owner and chairman Tom Wagner said.
“We believe, with the support of his coaching staff, the club, and our supporters, he will take Blues forward on the next stage of our journey.
“His playing philosophy will help to realise the ambitions we have set for Birmingham City.
“Wayne has been preparing for an opportunity like this since he embarked on his coaching education whilst still a player at Manchester United.
“He and his staff have the full support of the board and everyone at the football club.”
Rooney also said, “I am absolutely delighted to be joining Birmingham City at such an exciting time.
“It is very clear that they have a plan and are committed to realising their ambition for the club.”
Rooney added: “It’s a project that gives me a sense of purpose and I can’t wait to get started.
“I have a clear way that I want the team to play, and my coaching staff and I will work hard to implement it. We will create a winning culture here with an identity that gets Blues fans on their feet.
“My job is to elevate the club to the next level. I know what the expectations are and our job is to deliver.”