The 41-year-old, who has been assisting Belgium national coach Roberto Martinez, began his playing career at the club and will now start his managerial one at he same destination.
Henry helped Monaco to the Ligue 1 title in 1997, but times have changed dramatically this season, with the club languishing third from bottom on the table, a position which led it to sack coach Leonardo Jardim last week.
Jardim had led Monaco to Ligue 1 glory in 2017, its first title in 17 years, as well as a UEFA Champions League semi-final that same season.
But the door opened to Henry given the club's poor form this season and the need for change at the top.
“In the first place, I thank AS Monaco for giving me the opportunity to coach the team of this club which is so special to me," Henry said.
"I am very happy to come back to AS Monaco and extremely determined to meet the challenges ahead. I can not wait to meet the players to start working together.”
Former Arsenal striker Henry will take control on Monday and will be joined by Joao Carlos Valado Tralhao, the under-23 coach of Benfica, and Patrick Kwame Ampadu, who coaches at the Arsenal Academy.
Bon chance, @ThierryHenry! 🤞— Arsenal FC (@Arsenal) October 13, 2018
A big opportunity with @AS_Monaco, a club close to your heart - and we'll all be rooting for you 🙌
(P.S. - We can't wait to see you go head-to-head with @OfficialVieira and @OGCNice 😉) pic.twitter.com/1DJtdLneHI
Henry played 141 games for Monaco between 1993 and 1999, scoring 28 goals.
The year after winning the title with Monaco, he also won the FIFA World Cup with France, helping the national side to success at UEFA EURO 2000 two years later. He scored 51 goals in 123 appearances for Les Bleus
He won the domestic double with Arsenal in England in 2002 and 2004, the Champions League in 2009 with Barcelona along with Spain's domestic double in that year and also 2010 before a stint at New York Red Bulls and punditry on television in the UK.
In coaching terms, Henry has already made history, helping Martinez guide Belgium to third place at this year's FIFA last World Cup, just two years into his assistant role.