Richards replaces Gary Gold at the helm at Kingston Park once his three-year ban for his involvement in the 'Bloodgate' scandal ends in August.
The former England No.8 had been linked to roles at Worcester and Sale, however the vision of the Falcons owner Semore Kurdi tipped the balance.
Richards, who will link up with former Leicester colleague John Wells at Kingston Park, told the club's official site: "I am delighted to get the opportunity to join Newcastle Falcons. Whilst there was interest from other clubs, there are two reasons why I chose the Falcons - the supporters and Semore Kurdi's ambition for the club.
"I met up with Semore and his vision made my mind up.
"The Falcons fans are very enthusiastic about their rugby and they are fantastic people with a great sense of humour who you can enjoy a laugh with."
Kurdi is delighted to have completed a deal to bring Richards to the club.
He added: "It is not often that you get a chance to work with two people as talented and accomplished as Mr Dean Richards and Mr Gary Gold.
"Dean needs no introduction in the world of rugby, and it will be a true honour to have him at Newcastle Falcons next season.
"In the meantime, we are 100% behind Gary and his team who have and who continue to work magnificently as we fight to preserve our Aviva Premiership status.
"The progress we are making and the tremendous support from our loyal fan-base is crucial in our fight to stay in the Aviva Premiership and I guarantee that Gary and his team will have the support of everyone associated with the Falcons as they have mine over the challenging weeks ahead between now and the end of the season."
Richards started his coaching career at Leicester Tigers, winning four Premiership titles and two Heineken Cups at the club, where he spent 15 years as a player.
He then took over at Harlequins in 2005 when the Londoners were in the second tier and led them back into the Premiership, establishing the club as a force in the top flight.
However he resigned following the Bloodgate scandal in 2009- which saw Richards handed the lengthy ban.
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