The former Manchester United, Everton and England player becomes the permanent successor to Mark Sampson, who was sacked last September.
Neville, 41, has been given a contract until the end of the 2021 European Championships, which the FA hopes to host, and he takes over a team that is third in the world rankings, behind only the United States and Germany.
"I am honoured to be given the chance to lead England. With the new coaching team we are putting in place, we can help the players build on their great progress in recent years. This squad is on the verge of something special and I believe I can lead them to the next level," Neville said.
"I can't wait to get out on the training pitch and down to work with an elite group of players at the top of their game. I am also passionate about working within the wider set-up at St. George's Park, with influential people such as Mo Marley and Casey Stoney, and with the support of Baroness Sue Campbell and the wider women's game. There is a commitment to excellence that has paid dividends in recent years and I know we can continue the great growth of women's football inspired by the Lionesses.
"There is no greater honour than representing your country and it will be a privilege to do it again."
Given the fact that he has never worked in the women's game before, his appointment will raise some eyebrows but he has many fans at the Football Association and does hold a UEFA Pro Licence.
Capped 59 times by his country, he has also held coaching positions at his former club United and Spanish side Valencia, as well as doing some work with England's U21 side.
Since those stints in the dugout, he has worked as a pundit for the BBC and Sky, and is also a co-owner of Salford City with the other members of United's famous "class of 92", including his older brother and former England men's assistant coach Gary Neville and Ryan Giggs, who was last week named as Wales manager.
Coaching would appear to run in the family, too, as Phil's twin sister Tracey Neville is the head coach of the England netball team.
Known for his versatility as a player, Neville will start work immediately and he is currently with the Lionesses at their warm-weather training camp in La Manga, Spain, where they played the Netherlands in a behind-closed-doors friendly on Tuesday.
His first challenge will be the SheBelieves Cup tournament in March, when England head to the United States for games with France, Germany and the hosts, but the big target will be next year's World Cup in France.
The next qualifying game is against Wales in Southampton on April 6 and Neville will be eager to build on the progress made under Sampson, who led the team to third place at the 2015 World Cup and the semi-finals of the 2017 Euros.
The Welshman's reign unravelled rapidly, however, when he was accused of racism by England striker Eni Aluko, although he was eventually sacked for "inappropriate and unacceptable behaviour" in a previous role with Bristol Academy.
That prompted the FA to turn to England U19 coach Mo Marley as a caretaker manager and she led England to a 1-0 defeat by France in a friendly in October and two convincing World Cup qualifying wins over Bosnia and Herzegovina and Kazakhstan.
There has been widespread speculation that Neville was effectively given the job because of a lack of alternatives, particularly after early favourite Emma Hayes, the Chelsea manager, ruled herself out of contention.
But both Marley and Neville were among a group of candidates who were interviewed by Baroness Sue Campbell, the FA's head of women's football, and the governing body is understood to strongly reject claims that the process was in any way botched or rushed.
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