The 39-year-old has been appointed at the Championship club after impressing in two rounds of interviews as acting chairman Peter Pannu sought a successor to Chris Hughton, who departed St Andrew's for Norwich almost three weeks ago. The length of Clark's contract was not disclosed.
Pannu said: "I was impressed by Lee's tenacity, zest and his ambition. He is enthused by the challenge ahead and is determined to make Birmingham City a real force in the npower Championship this season. Judging from his record at Huddersfield, I know he has the capability to do exactly that."
He added: "The shortlist of four, out of the 22 applicants, that we put together meant that the appointment of Lee Clark was carefully studied and was a thorough and informed decision by the board.
"I now expect the fans to give him their full support."