The former City, Arsenal and France midfielder has been working as football development executive at the Etihad Stadium since retiring as a player two years ago.
The move to take charge of what is effectively the City reserve team follows the departures of manager Roberto Mancini and a number of his backroom staff this week.
Attilio Lombardo, the former Italy, Sampdoria and Crystal Palace player, had been the coach primarily responsible for the EDS, which is the transitional team from City's youth set-up to the senior side. It plays in the Premier League Reserve League but does not feature senior players outside the first-team picture.
Vieira's move from an administrative position underlines his desire to move into coaching after completing his UEFA B licence last year.
The 36-year-old, who will officially take up the role on June 1, said: "After spending two years working across a number of areas of the club and with a particular focus on the youth academy, I feel honoured and privileged to have been offered this role. This marks a new chapter both in my career and in my life and I am looking forward to it immensely.
"My passion for the development of young talent has only grown in my time at City and I am pleased to be able to play my part in helping to shape the footballing future for Manchester City."
Vieira, who is now hoping to attain his A licence, won the World Cup as a player in 1998 and the European Championship two years later among 107 international appearances. He won nine domestic league titles including three with Arsenal, with whom he also won the FA Cup four times. A fifth FA Cup came at the end of his career with City in 2011.
City chief executive Ferran Soriano said: "Patrick is a world champion and it is a great honour that he has chosen Manchester City to begin his football management career.
"I have seen him carefully considering options and choosing to coach for the best reasons; he has a love of the game and a willingness to continue to learn and transmit his knowledge and experience to young footballers.
"Patrick's role is of the highest long term importance for the Club. The ability of the Academy, the elite development squad and the first team to work together using the same football concepts is key to our success and sustainability."
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