Butcher has not stood in a technical area since he was sacked by Newport County in 2015, bemoaning that "the game had fallen out of love" with him.
However, the 59-year-old has decided to take a stab at international management and is excited for the challenge ahead.
"Becoming a national team coach is the next step for me," he told 'BBC Sport' after the appointment was announced.
"People asked me whether I'd fallen out of love with the game but it felt more like the game had fallen out of love with me," he added.
"I've enjoyed my punditry work, personal appearances and after-dinner speaking but there's nothing like getting back in the dugout.
"I know what it takes to play for your country and want to impart that knowledge on my players."
Butcher's first major job with the team will be leading them during the 2019 AFC Asian Cup which begins in January.
They will face China, South Korea, and Kyrgyzstan in the group stages of the competition.