While Keegan, who has been managing Fulham for just under a year, intends to retain an interest in the Second Division champions' development, he will give up managing them to be the full-time England coach.
Keegan's decision, which ends more than two months of speculation, will give England a significant boost as the team attempts to qualify for next summer's European Championships.
"I've said I'm definitely going to take the job. We've got to stop messing around," Keegan said last night. "I've needed time to think about it and weigh it up but the more I've worked with the players, the more I've wanted to do it.
"The time I need is to do it right by Fulham Football Club, who have been fantastic to me. The board at Fulham and Mr Fayed know all about it.
"I had talks with the FA last week. They said they wanted me to take the job and I said `put an offer to me'. They put an offer to me to take it either full-time or part-time."
David Davies, the Football Association's acting executive director, expressed his delight at the way things had gone for Keegan and England.
"He wanted to come and help us and my goodness he has helped us for four games. He's made a huge impact - everybody's seen that - on and off the pitch," Davies said.
Melvin Penner, head of the fans' action group Fulham 2000, said: "I'm not surprised. He's obviously done a good job for England and he obviously desperately wanted the England job full-time. Unfortunately it coincided with his contract at Fulham. I don't think the [Fulham] fans will be very happy but they will probably wish him well."
The former Scunthorpe, Liverpool, Hamburg, Southampton and Newcastle player scored 21 goals in 63 England international before retiring to the golf courses of Spain. He was surprisingly lured back by Newcastle to be manager and he lifted the side from the brink of relegation to the old Third Division to contention for the Premiership championship. He failed to win the title and, under pressure to commit himself to the club long-term in the face of the club's flotation, resigned.
He was then attracted back to the game, to Fulham, by Mohammed Al Fayed.
Initially he took an overseeing role, as his title at the club, chief operating officer, indicates. But, last season, after reaching the play- offs he sacked Ray Wilkins as coach and took over himself. This season the team, on which he has spent pounds 11m, has romped to the title.
In February this year, after Glenn Hoddle resigned as the England coach in the wake of his comments on disabled people, Keegan was immediately touted as a replacement. However, because of his loyalty to Fulham he waited while Howard Wilkinson briefly took charge, but then agreed to coach the side on a temporary basis for four matches.
The first of these was a European championship qualifier against Poland last month, which England had to win to have any chance of staying in the competition. With Paul Scholes scoring a hat-trick, England won the match 3-1 and the momentum behind Keegan's candidature became almost overwhelming.
First it engulfed Fayed, who said he would be prepared to release Keegan from his obligations as "a gift to the nation". Then, with Fulham having completed the first stage in their regeneration, it swept away Keegan himself.Reuse content