Malone, the top assistant to the Warriors' Mark Jackson since 2010, replaces the fired Keith Smart. He becomes the franchise's 25th coach and first under the new ownership group headed by Silicon Valley software magnate Vivek Ranadive.
The sale of the Kings from the Maloof family to Ranadive's group was approved by the NBA Board of Governors last week and became official Friday.
"Hiring Coach Malone is our first step in giving the best fans in sports the excellence they deserve," Ranadive said in a statement, adding that during his time as a part-owner of the Warriors he "developed a great relationship with Coach Malone and witnessed first-hand how instrumental he was to the success of the team."
Smart had compiled a 48-93 record in two seasons in Sacramento, including a woeful 28-54 mark in 2012-13.