The Arsenal legend is back in Major League Soccer after signing a two-year contract that includes an option for 2022, the team announced.
"It’s an honor to coach the Montreal Impact and return to MLS," Henry said.
"It’s a league I know well, in which I had some very nice moments. To be in Quebec, in Montreal, which has an enormous multicultural heritage, it’s extraordinary. I’ve always kept an eye on the club and now I’m here."
Impact president Kevin Gilmore revealed to Tony Marinaro of TSN 690 that Henry reached out to the club and that no other candidate was interviewed about the vacancy.
The 42-year-old replaces Wilmer Cabrera after the Impact announced in October that the Colombian's contract would not be renewed. Cabrera spent about two months in charge following the dismissal Remi Garde in August.
The 2019 campaign was one of Montreal's worst since arriving in MLS in 2012. The club finished ninth in the Eastern Conference with just 41 points and missed the playoffs for the third consecutive season. However, Montreal managed to win the Canadian Championship for the fourth time in its history.
Henry spent five seasons as a player with the New York Red Bulls, scoring 51 goals and providing 42 assists in 122 appearances.
After retiring in 2014, Henry joined Roberto Martinez's coaching staff with the Belgium national team before getting his first managerial job at former club AS Monaco in October 2018.
His return to Ligue 1 lasted just over three months before Monaco relieved him of his duties in January following a string of poor results.
Henry, widely considered one of the greatest forwards of all time, established himself as a world-class player during his illustrious career at Arsenal, with whom he won two Premier League titles. He was a finalist for the Ballon d'Or on two occasions.