Trotters chairman Phil Gartside said: "We feel Gary is the right man to take Bolton Wanderers forward.
"I have paid particular attention to his career and he has demonstrated to me that he is prepared to roll his sleeves up and has the right temperament for a battle, which this season is undoubtedly going to be."
Megson started his managerial career with Norwich City and has also had spells in charge at Blackpool, Stockport County, Stoke City, West Bromwich Albion and Nottingham Forest.