The 34-year-old was given permission to speak to the Robins on Friday after the Sky Bet Championship strugglers triggered a release clause in his contract at Barnsley.
Johnson made 199 appearances as a player over six seasons at Ashton Gate and helped the club to promotion in 2007 but he takes over with City in the relegation zone in the second tier, albeit on goal difference
Bristol City's chief operating officer Mark Ashton believes Johnson is the right man for the job and said: "Lee is a very bright, intelligent young man who is highly motivated and very detailed in his approach
He's well-known to the club; fans, stakeholders and staff.
"He is one of the up and coming coaches in the country and having interviewed him, I had no hesitation in recommending to the board that Lee is the right fit for this football club.
"Lee also has the advantage of knowing Bristol City very well and will be able to fit seamlessly back into Ashton Gate.
"There are substantial synergies in the way that we think and the way that we believe football departments should be operated.
"We'll work together to build this football club for sustainable success."
Ashton added: "I'd like to thank Barnsley FC for their professionalism, allowing us to speak to and subsequently appoint Lee."
Johnson's dad, Gary, managed City from 2005 to 2010 and took them to within 90 minutes of the Premier League when they lost to Hull in the 2008 play-off final
Lee Johnson was named Sky Bet League One Manager of the Month for January after turning round a dismal start to his first full season in charge at Oakwell
Barnsley were in the relegation zone at Christmas but have mounted a play-off challenge on the back of six straight league wins and booked a place at Wembley in the Johnstone's Paint Trophy final on Thursday night with a penalty shoot-out triumph at Fleetwood.
John Pemberton, who was placed in temporary charge of Bristol City when Steve Cotterill was sacked, will stay on as first team coach.
Lee Johnson left Oldham for Barnsley in February last year after two years at the helm there and boasts a career win percentage of 36.
Source : PA
Source: PA