The former Republic of Ireland and Wolves boss will take charge until the end of the campaign after the Bluebirds sacked Neil Harris following a run of six straight defeats.
McCarthy said: “I'm delighted to be here. I'm thrilled by the opportunity.
“I want to get the club back to winning games and I want to get smiles back on the players' faces. If we do that, then we'll get smiles back on the fans' faces.
“We've got a good squad of players and I'm looking forward to getting down to work."
Harris paid the price for Cardiff's shocking form with the Welsh side in 15th place in the Championship.
They reached the play-offs under Harris' guidance last season.
Cardiff believe the experience of McCarthy, 61, will steady the ship before they look to make a long-term appointment this summer but the appointment is unpopular with their fans.
He left Cypriot side Apoel earlier this month.