He will officially take up his position in tandem with Declan Kidney following the Heineken Cup final next Saturday (May 24) and will not be involved in the preparation of the Ireland squad for the forthcoming game against the Barbarians and the summer tour.
Commenting on his appointment, McNaughton said: "I am looking forward to working with Declan and the rest of the players over the coming months and beyond.
"I can echo his sentiments by saying that there is no greater honour than working with your own national team and while certainly there are challenges ahead for all of us, there is also a certain amount of anticipation about the possibilities that exist for Irish rugby and this squad.
"Declan's focus will remain totally on the Munster squad for the next few weeks and following this we will be setting about putting in place the structures around the Ireland squad ahead of the autumn internationals, which gives us a certain amount of latitude to do that."
IRFU Chief Executive Philip Browne said: "Paul brings a wealth of international experience to the management of the squad and has a reputation that is held in the highest regard throughout the rugby and business communities."
Educated at Rockwell College where he won both schools Junior (1968) and Senior (1970) Munster cups, McNaughton went on to study Economics in Trinity College Dublin.
His business career in the financial services sector has seen him travel globally over the last 30 years before finishing his active career in the industry in 2004. He currently acts as a consultant and holds a number of non-executive directorships in IFSC investment companies.
He represented Wanderers FC up to 1975 where he won both a Leinster League and Cup in 1973. Upon moving to Greystones RFC, where he has served as a player, captain, coach and President, he won the first of his 15 caps for Ireland against Scotland in 1978.
He went on to win another 14 caps before his final appearance for his country against France in 1981. He was also part of the tour to Australia 1979.
Following the end of his playing career, he remained active in the administration of the game at both club and provincial level with Leinster.
He has been part of the professional structures of the game in his home province and became manager of the Leinster squad in August 2004, where he worked with Declan Kidney. He has also worked as chairman of the Leinster professional team management committee.