The 55-year-old former Tottenham boss has agreed an initial two-year contract at Craven Cottage with the option of a further 12 months.
The Dutchman replaces Mark Hughes, who resigned as Fulham manager last Thursday after one season at the helm.
Jol, who was sacked by Spurs in 2007, was linked with the Fulham role last year but Ajax refused to release him from his post as head coach at the Amsterdam ArenA.
He has been out of work since quitting the Dutch club last December and has now spoken of his excitement at returning to the Barclays Premier League.
"I am very happy to join Fulham Football Club, a wonderful traditional club," he told the club's official website.
"It is a club with good, solid foundations and a great fan base.
"I am looking forward to being part of the Fulham family and thank the chairman for the trust he's shown in me."
Fulham chairman Mohamed Al Fayed said on the club's website: "I would like to welcome Martin Jol to Fulham. He understands my vision for the club, and believes in what we are striving to achieve here.
"I know that he will dedicate himself to helping us move forward, and is with us for the long term, to help us build and progress.
"We have enjoyed three incredibly successful years, and my hopes and dreams for this club are for that journey to continue.
"I know that with his wealth of experience and success, Martin is the right man to help us do this."
Hughes also built on a reputation initially forged at Blackburn and then Manchester City, where many felt he was unlucky to lose his job, but departed insisting he had received no contact with any other club, despite being heavily linked with Aston Villa.
Jol will, though, have little time to get his feet under the table, with the Fulham players due to report back for pre-season training on June 23 and facing a Europa League qualifier in less than four weeks' time.
A club statement confirmed: "Martin joins Fulham on an initial two-year contract with the club having an option to extend for a further year.
"He will arrive at our Motspur Park training ground in advance of the players' return to training later this month."
Former West Brom and Coventry midfielder Jol moved to Spurs in summer 2004, initially as an assistant to Jacques Santini, after having started his coaching career with stints at Roda JC and RKC Waalwijk in his homeland.
The Dutchman was handed the top job at White Hart Lane when Santini left the following November and won many admirers for the attractive football played under him.
Following his dismissal in October 2007 - he was unceremoniously dumped following the UEFA Cup defeat by Getafe - Jol spent the 2008/09 campaign at Hamburg before succeeding Marco van Basten as Ajax coach in May 2009.
He helped the Amsterdammers to KNVB Beker glory in 2010 before stepping down last December with the club in fourth place in the Eredivisie standings in what turned out to be a title-winning campaign.
Martin Jol Factfile
1956: Born January 16 in The Hague, Holland.
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