Two-time former Blackpool boss Grayson, 51, has agreed a deal until the end of the season to succeed Joey Barton at Highbury.
Academy coach Simon Wiles has overseen the last five league games, which have yielded just two points, leaving the club 14th in the table.
Grayson told the club website: “Fleetwood Town are a football club I know a lot about. It’s a club with a really good infrastructure.
“I’m delighted to get back to work and be given this opportunity to get the club winning again. I can’t wait to get started.
“First and foremost, I want to get Fleetwood back to winning ways, get a smile on players’ faces again and get them enjoying what they are doing.
“It’s never easy when you are losing games and things aren’t going your way, so I intend to get them smiling, working hard, and letting us earn the right to win football matches. Hopefully, we can do that very quickly.”
Grayson has been out management since his second Blackpool stint ended almost a year ago after just seven months.
The Yorkshireman had begun his managerial career in 2005 with Seasiders, the first of four clubs he guided to promotion from League One.
Other promotions were achieved at Leeds United, Huddersfield and Preston North End, since when he has also had stints at Sunderland and Bradford City.
He inherits a Fleetwood side without a win in nine games in all competitions and with just one victory in 12 in the league.
Thanks for reading. If you value what we do and are able to support us, a digital subscription is just £1 for your first month. Try us today by clicking here