Bowyer took caretaker charge of Rovers in March after Michael Appleton - their third permanent boss of the 2012-13 season - was sacked after 67 days in charge and steered them away from the npower Championship relegation zone.
"It is a huge honour and a proud moment for me," said Bowyer. "I have been at the club for nine years, I know the traditions. The foundation of the club was built on hard work and that is what we need to produce."
He added: "The supporters want to see the players out there playing for the shirt and giving it their all. We need the players to show the same passion that the fans gave us during our last six games where we just lost the once."
The 41-year-old was first placed in charge of Blackburn in December following Henning Berg's ill-fated reign and he remained unbeaten during his four-game spell, winning his first three matches against Barnsley, Nottingham Forest and Bristol City before drawing at Wolves.
After Appleton's dismissal, Bowyer took charge for a second time and steered the club away from the bottom three as Rovers took 12 points from their final nine league games to finish 17th in the standings.
Rovers' managing director Derek Shaw added: "In the two spells as caretaker manager Gary achieved approaching two points a game.
"He has the respect of the players and we feel his in-depth knowledge of working with the youngsters will be of great benefit to Rovers.
"He is held in high regard in football and we certainly wish him all the best going forward."