The 66-year-old Chilean had been without a team since being sacked by West Ham last December.
Betis fired Rubi just three games after LaLiga's restart, following its suspension amid the coronavirus pandemic, leaving the team in 14th.
Sporting director Alexis Trujillo was handed the reins until the end of the season and has overseen two wins in five games.
Although Pellegrini's greatest achievement is a Premier League and EFL Cup double with City in 2013-14, he has impressed in LaLiga with teams from outside the established elite.
Pellegrini spent a trophy-less 2009-10 with Madrid before taking over Malaga and being denied a return to the Champions League semi-finals in 2012-13 by a pair of stoppage-time goals from Borussia Dortmund.