Hrubesch, who replaces Rainer Adrion, coached the Under-21 team to the European title in 2009 before taking over the Under-18 team.
Tournament favourites Germany went out of the European Under-21 championship in Israel with two consecutive defeats while Germany's Under-19 and Under-17 teams failed to even qualify for their European championships.
"Coaching the new Under-21 team is a very interesting job with spectacular events like the European Championship in 2015 and the 2016 Rio de Janeiro Olympics coming up," Hrubesch, who as a player led Germany to the 1980 European title, told reporters.
"I did not hesitate to agree when (DFB General Secretary) Helmut Sandrock asked me yesterday to do it."
The DFB said the decision was take after consultation with Germany coach Joachim Loew, who had poached several Under-21 players just before the tournament for a national team tour of the United States.