The 42-year-old has signed a two-year deal, with an option of an extra year until 2022.
The Frenchman was an assistant coach for the Belgian national team which reached the semifinals of the 2018 FIFA World Cup.
“Henry will bring a new energy to our club,” Montreal Impact president and CEO Kevin Gilmore said in a statement.
“He shares our vision to elevate this club and will help us achieve our goals on and off the field. He is a competitor and a leader who has proven himself at the highest level throughout his career. He now brings these qualities with him to Montreal, a place he wants to be.”
Henry spent four-and-a-half years with the New York Red Bulls in the MLS before retiring in December 2014.
“It’s a league I know well, in which I had some very nice moments,” the two-time Ballon d’Or finalist said. “To be in Quebec, in Montreal, which has an enormous multicultural heritage, it’s extraordinary. I’ve always kept an eye on the club and now I’m here.”
Henry scored 174 goals in 254 appearances for Arsenal between 1999 and 2007, and scored 51 times in 123 games for France, helping his country to win the World Cup in 1998.
He will be at the helm of the Canadian side as of mid-January, when training camp begins.