"I'm very glad we were able to sign a contract with such a top coach," Lokomotiv president Olga Smorodskaya told the club's website.
"Bilic is one of the best coaches in Europe and we had to beat many clubs, including those from the English Premier League, in order to sign him."
The 43-year-old Croat signed a three-year deal with the railway side and replaces Portuguese coach Jose Couceiro, whose contract was not renewed following a disappointing season.
Lokomotiv, who lost to city rivals Spartak 2-0 in the season's finale on Sunday, finished seventh and missed a spot in the Europa League next season.
Bilic becomes the second high-profile foreign coach to join a top Russian club in two days after Spartak Moscow announced on Sunday the hiring of former Valencia boss, Spaniard Unai Emery.
"Lokomotiv is a big club and it's a big challenge for me," Bilic was quoted as saying by local media.
"But I have ambitions to achieve a good result here." After hanging up his boots in 2001, the former Croatia international coached his hometown club Hajduk Split before taking charge of his country's national team in 2006.
He led Croatia to the Euro 2008 quarter-finals, where they lost to Turkey in the penalty shoot-outs.