Manuel, 60, former manager of the Cleveland Indians, has a lifetime record of 220-191 for a winning percentage of .535, which will make him fourth-best among active managers with at least 400 games experience.
Under his guidance, the Indians won the American League Central Division in 2001.
Manuel was one of eight men interviewed for the post and the lone candidate from within the Phillies organization. Others considered were Don Baylor, Grady Little, Buddy Bell, Jim Fregosi, John Russell, Terry Pendleton and Jim Leyland.
"Charlie has the great ability to communicate with his players and build relationships with them, yet he demands excellence," General Manager Ed Wade said.
Manuel spent the last two years as an assistant to Wade.