The 40-year-old has stepped down from his role as a Sky Sports pundit but will remain part of Roy Hodgson's coaching set-up with England.
"I'm delighted that Gary has decided to take this excellent opportunity, it's the right time for him, I think he's ready and I'm 100% behind his decision- I'm so pleased for him
"As far as I am concerned this will be an extra string to his bow and the experience he will gain in Spain can only benefit our work together with the national team" said the England boss.
Peter Lim, the Singaporean owner of the La Liga outfit, also has a stake in Salford City, the non league club co-owned by Gary.
Neville's brother Phil (also a Salford co-owner), who joined the Spanish club as assistant manager in July, will stay in his role at the Mestalla.
"I am absolutely thrilled to be given this opportunity with Valencia and it is an exciting new period of my coaching career.
"Valencia are a huge football club with an immense standing and history- and I know from my time as a player the passion and dedication of the Valencia fans."
Despite Neville's lack of managerial experience, Lim explained that it was his personal qualities and respect within the English game that persuaded the club's board to give him the job until the end of the current campaign.
Neville's brother Phil will assist interim boss Voro for Valencia's next two matches- away to third-tier side Barakaldo in the Copa del Rey on Wednesday and at home to Barcelona in La Liga on Saturday.
Next week's home Champions League tie with Lyon will be our former right back's first match in charge.
Neville made 400 appearances for United under Sir Alex and is one of the most decorated English and European players of all time, having won 20 major honours in a stellar 19-season career at Old Trafford.
It's fair to say that many opposition fans did not warm to Neville during his career, but he has won praise and accolades for his excellent tactical analysis and level-headed punditry on Sky Sports.
Valencia remain in contention for the Champions League knockout phase but have struggled in the league this term, winning only five of their 11 games having finished fourth in 2014/15.
We wish Gary and Phil all the best in La Liga.
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