He is joined by Portuguese backroom staff and compatriots Joao Mario, Joao Cunha and Bruno Lage. He will be presented to the media at a Hillsborough press conference on Thursday July 9.
The 49-year-old, who has managed 14 clubs since his first in 1998, left his most recent post at FK Istanbul Basaksehir in 2012.
Carvalhal played for a host of Portuguese teams during a 15-year senior playing career including three spells at Braga, whom he later managed.
He won one Portuguese Cup and Super Cup whilst in charge of Leixoes during the 2001/02 season as well as a Portuguese League Cup with Vitoria Setubal in 2008.
Owls chairman Dejphon Chansiri gave his reasons for the appointment and believes Carvalhal will prove to be a success at the club.
“I firmly believe that this appointment will take our team and our club to the next level and towards where we all want to be, the Premier League,” he said.
“It is important for our supporters that they watch their team play attractive, aggressive and entertaining football.
“Carlos buys in completely to this philosophy and I am confident that his experience, knowledge and ability will herald the start of a successful new era for Sheffield Wednesday.”
The Owls have undergone a complete change in management structure this summer, with the introduction of a sporting director committee to oversee affairs at Hillsborough.
That committee includes former West Ham and Newcastle manager Glenn Roeder, scout Paul Senior and former Fulham coach Jonathan Hill.
Chansiri added: “Since I came to Hillsborough in February, I have slowly absorbed how to become 100 per cent part of the Sheffield Wednesday family.
“Myself and my team have worked extremely hard as we all have the same target, the same objectives. We are stronger now and learn more about football every day.
“Carlos, myself and everyone connected with our club have the same ambitions.”