The former New Zealand offspinner takes over in November from Denis Aberhart after finishing the season with his county side. Aberhart pulled out of the running after a successful two-year term.
Described in his playing days as a "spin bowler with a fast bowler's attitude", the often fiery Bracewell has forged a successful coaching career, beginning with Auckland, before steering Gloucestershire to six county trophies in five years.
"Prior to John's involvement, the club had only won two trophies in its 150-year history," New Zealand Cricket chief executive Martin Snedden, a former international teammate of Bracewell, said.
"Significantly, he has taken Gloucestershire to four final victories at Lord's. This demonstrates that he has the ability to get his teams to perform in high-pressure situations."
Bracewell played 41 Tests for New Zealand from 1980 to 1990, capturing 102 wickets at an average of 35.81 and a best haul of six for 32. He took one 10-wicket match haul.
As a batsman, Bracewell hit his one and only Test century against England at Trent Bridge in 1986. In all he scored 1,001 Test runs at an average of 20.42, including four half centuries.
Snedden said Bracewell would finish the season with Gloucestershire, with the county still in contention to win four competitions, before joining New Zealand on November 1, after their tour of India and Pakistan.
Assistant coach Ashley Ross will take the team on the tough Test and one-day tour of the subcontinent.
Former New Zealand captain Jeff Crowe has stepped down as manager of the national team, with former Auckland Cricket chief executive Lindsay Crocker replacing him.
Crocker played first-class cricket in New Zealand for the Northern Districts and also played professionally in England and South Africa.
