A former Brewer, Counsell replaces Ron Roenicke, who was fired just 25 games into the season on Sunday.
Counsell doesn't have any managerial experience at any level, but has been with the Brewers' front office since 2012 as a special assistant to general manager Doug Melvin. He played 16 seasons in the majors, retiring after spending the final five years of his playing career with the Brewers following the 2011 season.
"Craig has many years of major league playing experience, and his three-plus years of learning all aspects of baseball operations helps prepare him for this managerial position," said Melvin. "There will be challenges, but Craig has never shied away from leadership responsibilities on the field as a player or in his most recent role. I believe his on-field success as a player and his awareness for preparation should resonate in the clubhouse. Growing up in Milwaukee, it is very important for him to bring a winning culture and team success to Brewers fans."
A former infielder, Counsell, 44, batted .255 with 42 homers, 390 RBI and 103 stolen bases in 1,624 games with Colorado (1995, '97), Florida (1997-99), Los Angeles (1999), Arizona (2000-03, 2005-06) and Milwaukee (2004, 2007-11)
"I am grateful and honored to have the opportunity to manage the team that I rooted for, played for and worked for in the front office," said Counsell, who won a pair of World Series titles. "In the 10 years that I have been a member of the organization, I have grown to feel a great responsibility to baseball in the city of Milwaukee. This has been a difficult time for the Brewers, and we all share the responsibility. I understand the work ahead to be the team our fans deserve. We have challenges ahead of us and I look forward to working tirelessly to achieve our goals."
The Brewers jumped out to a disappointing start and sit last in the Central Division with a 7-18 record following last season's second-half collapse.
Last season, the Brewers were 51-32 and led the Central by 6 1/2 games on June 28, but wound up finishing third in the division and six games back in the wild card race at 82-80.
Despite the forgettable finish, Milwaukee decided to stick with Roenicke and picked up the 2016 option on his contract in March.
In four-plus seasons as the Brewers' manager, Roenicke compiled a 342-331 record. In his first year in 2011, he led the Brewers to a franchise-record 96 wins and a division title.