The npower League One club were granted permission to hold discussions with the Falkirk boss on Wednesday and, having revealed talks were "progressing well", personal terms have now been finalised, with Pressley replacing Mark Robins following his switch to Huddersfield three weeks ago.
The former Scotland defender, 39, enjoyed a brief playing spell with the Sky Blues during the 1994/95 Premier League season.
Pressley arrives at the Ricoh Arena to take charge of a financially-stricken Coventry side - who have had to pay Scottish First Division Falkirk an undisclosed compensation package - still boasting an outside chance of a play-off place.
The Scot is the fifth person in total to have managed City this season following Robins, Andy Thorn - sacked in late August - and caretaker bosses Richard Shaw and Lee Carsley, who has won three and lost two of his five matches at the helm in recent weeks.
Development director Steve Waggott said: "We have, once again, undertaken a very thorough process since the departure of Mark Robins to identify the number one candidate for the job and we are thrilled that Steven is joining us.
"He's a hungry and highly ambitious young manager and we have all been very impressed with him and his record so far.
"We wanted someone who could come in and hit the ground running because we have 10 very important games left this season. But we also wanted somebody who would take us forward into the future and prioritise youth development and the club's role in the community.
"Steven ticked every single box and I know everyone at Coventry City - from supporters to staff - will get right behind him."