"Matthaeus will be officially presented in a few days," BFU president Borislav Mihaylov said, adding that the former midfielder had agreed a one-year contract with an option for two more years.
Matthaeus, who captained West Germany to the 1990 World Cup title and won a record 150 caps, replaces Stanimir Stoilov who resigned following Bulgaria's back-to-back Group G defeats by England and Montenegro in the Euro 2012 qualifiers earlier this month.
"We asked the U21's side coach Mihail Madanski and former Bulgaria's assistant coach Tsanko Tsvetanov to assist Matthaeus for the next month's qualifier against Wales," Mihaylov added.
The 49-year-old Matthaeus will take charge of a national team for the second time as he was also Hungary coach from 2003 to 2005.
The 1991 FIFA World Player of the Year won numerous trophies during his playing days with Germany, Bayern Munich and Internazionale but has achieved limited success as a coach with Rapid Vienna, Partizan Belgrade, Brazilian side Atletico Parananense, Salzburg and Isreali club Maccabi Netanya.
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