The Minstermen sacked Gary Mills following Saturday's 2-0 defeat at home to Bradford - a result which left them 18th in League Two and four points above the relegation zone.
A club statement read: "The decision to appoint Nigel was based on his solid Football League experience, his strong coaching ability and his extensive knowledge of players throughout the leagues. The York City board of directors welcomes Nigel Worthington to the club and looks forward to working with him."
Worthington started his managerial career at Blackpool in 1997 before an impressive spell at Norwich, where he led the club to the Premier League in 2003/04.
He took over as Northern Ireland manager in 2007 and stayed in the position until 2011.
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- Nigel Worthington