Speaking from Sydney, McGahan, who was Munster's defence and backs coach under Declan Kidney, said: "I am delighted to be chosen as the next Munster Director of Coaching.
"It is a privilege and a great honour to be asked to lead one of the top clubs and biggest brand names in world rugby
"Having been involved with Munster for the past three seasons I fully realise what the expectations of all Munster supporters are.
"With a solid group of senior players at my disposal plus an exciting batch of young players coming through, a talented management group and strong administration, I hope to continue and fulfil those expectations in the short and long term.
"I have enjoyed my time working under Declan Kidney and would like to wish him all the very best in his role with the national side."
Munster Chief Executive Garrett Fitzgerald said: "I am very pleased that the process to fill the position has been finalised and done so in such an expedient manner.
"Tony McGahan has been involved with us for the past number of years, a period that saw him play an integral part in our Heineken Cup success and consistency in the Magners League.
"In that time he has displayed all the qualities that we believe are required to keep Munster to the forefront and we wish him well in the challenging times that lie ahead."
With regard to position of forwards coach, vacated recently by Jim Williams, Fitzgerald confirmed that it would not be further progressed until McGahan has taken up his appointment.