Hodgson, 78, replaces Gerhard Struber, who left the club on Friday after a six-game winless run realistically ended hopes of making the play-offs for promotion to the Premier League.
“I have had great conversations with the board and I am really excited by the opportunity to help until the end of the season,” said Hodgson, who will face Sheffield United in his first game on Friday.
With City 16th in the table and unlikely to be dragged into a relegation battle, chief executive Charlie Boss said Hodgson’s appointment was designed to set “standards and values” going forward.
“Roy’s appointment is about more than the results of the next seven games,” said Boss.
“Over the remainder of the season, he will help us set the standards and values at the club that we will need to be successful going forwards.
“Roy is a vastly experienced coach who has achieved and won at the highest level. He will support me, our players and our football staff as we build towards achieving our potential.”
Hodgson’s appointment takes him into half a century in management, having landed his first job at Swedish club Halmstad in 1976.
His first stint at Bristol City lasted just four months in 1982 before going on to manage a host of clubs including Inter Milan, Blackburn, Fulham, Liverpool and West Brom, as well as four years in charge of England between 2012 and 2016.
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