Allegri, 46, was sacked by Milan in January and replaces Antonio Conte, who left the Italian champions on Tuesday.
He said: "It is an honour for me, I'm very happy and I know what a big job coaching Juventus is."
Juventus director Giuseppe Marotta said: "Juve's aim has always been to keep winning, a real must given the club's prestige and past success."
Allegri won the Serie A title with Milan in his first season in charge in 2010-11.
First coached Serie C2 team Aglianese in 2004, before moving on to Grosseto.
Performed well at Cagliari before he was surprisingly sacked by current Leeds owner Massimo Cellino in 2010.
After a spell on the Udinese coaching staff, he was named Sassuolo boss before managing in Serie A for the first time at Cagliari.
Joined AC Milan and won Serie A at the first attempt. Followed that up with second and third-placed finishes but sacked in January with side 30 points behind leaders Juventus.
Juventus have won the title in each of the last three seasons, and finished 45 points ahead of Milan last year.
Allegri added: "We'll compete for the title all the way. As for Europe, we need to have a great run in the Champions League."
Conte surprisingly left the club on Tuesday with a year left on his contract, stating that he felt it "may be more difficult to keep winning with Juventus" in the future.
Allegri was sacked by Milan midway through last season after a dreadful start to the campaign that left them languishing in mid-table, and was replaced by Clarence Seedorf.
Seedorf - who was part of the BBC punditry team during the World Cup - left Milan at the end of the season and has been replaced by Filippo Inzaghi.
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