Atkinson has signed a six-month deal with the situation to be reviewed in the summer. "Mr Atkinson will take up his appointment as manager prior to the home game against Arsenal on 16 January," a club statement said.
Atkinson - who returns to football management eight months after his sacking by Sheffield Wednesday - takes over from Dave Bassett, who was dismissed last week. He has a reputation for being a troubleshooter, but steering Forest clear of relegation could prove to the biggest challenge of his colourful career.
Peter Shreeves, named as Atkinson's assistant, arrived at the City Ground insisting: "This is a marvellous challenge, not one to fear. Ron achieved the same at Coventry when they were in a tight situation.
"It's a massive task, it's no good me saying anything other than that. I saw the team play at Coventry on Saturday when they lost 4-0 and you could see there the confidence is low. It's a big job but I don't see the task being any more difficult than last year, and having done it once, you know what's required.
"I've worked with Ron before and I know that he gives magnificent team talks. That's what we need to lift the spirits and morale of the players. But although it's a big job, there was never any consideration of turning it down."
Forest go into the Arsenal match with 13 points from 20 games, including a run of 18 Premiership matches without a win. Saturday's defeat at Coventry, proved to be Micky Adams' only game in charge as caretaker manager.
Atkinson began his career in football management with Kettering Town in 1971 and made his name at West Bromwich Albion before being appointed Manchester United manager in 1981.
Sacked in 1986 despite two FA Cup victories, he returned to West Brom, followed by the most controversial chapter in his career, in 1988, when he took up a coaching post in Spain at Atletico Madrid under their volatile president, Jesus Gil. Despite taking the club from near the bottom of the table to the top, his reign lasted three months before Gil replaced him with his assistant, Colin Addison.
Atkinson resumed his career with Wednesday, but walked out to take charge at Aston Villa in 1991. Things did not work out, however, and in 1995 he took over at Coventry. A year later they avoided relegation and Atkinson made way for Gordon Strachan.
David Pleat's departure from Wednesday then saw him return to Hillsborough and guide the Owls to Premiership safety. But in May last year, he was once again out of a job after the Wednesday board decided not to renew his contract.
His predecessor at the City Ground, Bassett, was being spoken of by another club yesterday. Wycombe are looking for a temporary manager to replace Neil Smillie, sacked yesterday because of the club's poor results and disciplinary record.
Wycombe spokesman Alan Hutchinson said: "We are desperate to stay in this league so maybe we could take on someone, like Dave Bassett, on a temporary basis until the end of the season and pay a good bonus if he keeps us up. But whoever comes in will have to consider, `is it a good career move?' "
Hutchinson denied that Wanderers, who have appointed former captain Terry Evans as caretaker manager, had already spoken to Bassett.
ATKINSON THE MANAGER
Kettering Town 1971-74
Cambridge United 1974-78
West Bromwich Albion 1978-81
Manchester United 1981-86
West Bromwich Albion 1987-88
Atletico Madrid 1988
Sheffield Wednesday 1989-1991
Aston Villa 1991-1994
Coventry City 1995-1996
Sheffield Wednesday 1997-98
Nottingham Forest 1999-?