The 50-year old former Australia national team boss has signed a deal with the Sky Blues that will run until the end of the 2016/17 A-League season.
"It's a fantastic opportunity and I'm looking forward to working with the players and coaching Sydney FC to consistent domestic success and Asian Champions League qualification."
Regarding the appointment of Arnold, who won one Premiership and one Championship with the Central Coast Mariners, Sydney chairman Scott Barlow said: "On behalf of the Sydney FC Board I would like to welcome Graham Arnold to Sydney FC.
"Graham is one of the A-League's most successful coaches and has a proven track record of producing high quality, winning football teams.
"He brings to the Head Coach's role a wealth of international and Asian Champions League experience and as a former Socceroos Coach, has dealt with the demands of coaching a high profile team."
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