O'Leary, who has led the Georgia Tech Yellow Jackets to five straight bowl appearances, was introduced as coach of the Fighting Irish just hours after informing his players in Atlanta of his decision to leave.
Terms of O'Leary's contract were not disclosed.
O'Leary replaces Bob Davie, who was fired Dec. 2, one day after the Fighting Irish concluded a disappointing 5-6 season with a 24-18 victory over Purdue. Davie posted a five-year record of 35-25, mediocre by Notre Dame's lofty standards.
O'Leary, 55, was considered a candidate for the Notre Dame job in 1996, before the school chose Davie to succeed Lou Holtz.
"Notre Dame is the only job I would ever leave Georgia Tech for," said O'Leary, a New York native. "It's the pinnacle of all coaching jobs. In fact, I believe there are two great coaching jobs in all of sports, one being the manager of the New York Yankees and the other being the head football coach at Notre Dame."
O'Leary left Georgia Tech immediately, leaving assistant Mac McWhorter to coach the Yellow Jackets in the Seattle Bowl against Stanford.
Oklahoma's Bob Stoops, Oregon's Mike Bellotti and NFL coaches Jon Gruden of the Oakland Raiders and Steve Mariucci of the San Francisco 49ers had been mentioned as candidates to replace Davie. But all four said they were not interested in the high-pressure position.
Notre Dame has won eight national titles but none since 1988 under Holtz. Notre Dame will not be competing in a bowl for the second time in five seasons under Davie. The Irish also missed the postseason in 1999.
O'Leary had a 52-33 record at Georgia Tech since taking over for Bill Lewis with three games left in the 1994 season. He guided the Yellow Jackets to three top-25 finishes and twice was named Atlantic Coast Conference Coach of the Year.
O'Leary led the Yellow Jackets to 9-3 record last season and was named Bobby Dodd National Coach of the Year.
O'Leary was an assistant under Bobby Ross from 1987-91 and followed Ross to the NFL as defensive line coach for the San Diego Chargers. He returned to Georgia Tech as defensive coordinator in 1994 before replacing Lewis in 1995.
The Yellow Jackets began this year with Bowl Championship Series aspirations but were just 7-5.