Potter has left fellow Premier League club Brighton to take up the role and has signed a five-year deal with the Blues.
The 47-year-old said he was “incredibly proud and excited to represent Chelsea”.
Former Ostersunds FK and Swansea manager Potter led Brighton to a ninth-place finish last season, the club’s highest ever top-flight finish.
A former full-back in the Football League with Stoke, West Brom and York, Potter began his managerial career with Ostersunds FK in 2010, guiding them from the fourth tier of Swedish football to the first, winning the 2017 Swedish Cup and reaching the knockout stages of the Europa League.
He then took charge of Swansea City in June 2018, spending one season with the Championship side before joining Brighton following Chris Hughton’s dismissal.
Potter, who has been tipped as a future England boss, has led Brighton to fourth in the table this season after winning four, drawing one and losing one of their six Premier League games.
Source: BBC