The former Bolton Wanderers and West Ham United midfielder was a Premier League mainstay in the 2000s.
Nolan played 400 games in the top flight, while he scored 69 goals in that time.
"Kevin was very impressive through the process and showed a real desire for the job," said chairman Kelvin Thomas.
"He has done well in difficult circumstances in both of his previous managerial jobs and he impressed us with his knowledge, his energy, his experience and his passion. He showed a real desire and enthusiasm for the role, he couldn't wait to get started and he has already taken charge of training for the first time.
"He has been a leader throughout his career. Whether that be as a player where he was a Premier League captain of some distinction, to his managerial career where he enjoyed success at both of his previous clubs in difficult circumstances, to being a successful coach back in the Premier League, he has a hugely impressive CV.
"He is also very well connected and respected throughout the game. He has a fine record of working with players at all levels and of all ages and we are excited to welcome Kevin to the club.
"Kevin has been held in high esteem by both players and supporters of his previous clubs and we are delighted to have been able to secure his services for Northampton Town.
"Our immediate target is to try and move up the table and while we understand we have challenges to overcome, we believe Kevin is well placed to lead us forward on that."