The 67 year old was sacked by Fulham eight days ago after winning three of his 17 games in charge.
But the Roma fan - who managed the club between 2009 and 2011 - has been handed a quick return to management, replacing Eusebio di Francesco.
"I'm delighted to be coming back home," Ranieri said on Friday. "When Roma call you, it's impossible to say no."
Di Francesco was sacked on Wednesday after losing 4-3 on aggregate to Porto in the Champions League last 16.
"We have one objective remaining this season and that is to finish in the highest possible league position and secure qualification for the Champions League."