Cotter, who starts with the Blues this week, will be joined by new assistant coach, Jason O'Halloran, also on a two-year deal, working alongside members of the existing Blues coaching team.
Cotter is an experienced Head Coach at both domestic and international level and was most recently head coach of Fiji from 2020-22.
He was also Head Coach of Scotland from 2014-2017 - where he joined forces with O'Halloran - the pair taking the team from tenth to fifth in the World Rugby Rankings and credited with having a strong impact on the culture and performance of the team.
Cotter said he is both honoured and enthused.
"I would like to extend my thanks to the entire Blues organisation for putting their trust in me," said Cotter.
"I've watched this club thrive in recent years and I'm excited by the challenge of taking them forward and building on what is a very strong base."
"It's great to have Jason joining me at the Blues. Since our time in Scotland we've remained firm friends and often pick up the phone to discuss current trends in the game - I know he'll add real value to an already strong coaching team."
Cotter has a history of success, under his guidance European club side Clermont Auvergne reached lofty heights, making three Grand Finals before winning the coveted French Top 14 title in 2010 - the first title in the club's history. The team also won a European Challenge Cup under Cotter's guidance in 2006.
He said his experiences overseas can help in taking the Blues forward.
"When you take a new role it's important to acknowledge what's been going well for a team, while constructively challenging aspects you feel could improve. I think I can add fresh thinking, informed by my broad and varied coaching experiences to date.
"I'm looking forward to getting stuck in with the Blues and I'm energised to be back in New Zealand coaching at Super Rugby level."
Blues Chairman Don Mackinnon said Cotter's vast experience, partnership with O'Halloran and history of winning were key factors in bringing him to the Blues.
"We've been in communication with Vern for a while now and what shone through in our conversations was his desire to drive the club forward while building on the strong culture we've developed at the Blues over the last few years. He's an experienced and driven coach, has a history of success and I believe is the right fit for the role," Mackinnon said.
"Vern and Jason have proven they work well together, and we believe the pair will provide some fresh thinking and energy to take the club forward.
"We're really happy with our coaching mix for 2024 and beyond and believe Vern is the right man to set the direction for our coaching group and continue the development of some excellent younger coaches."
Those thoughts were echoed by New Zealand Rugby Manager, Professional Rugby, Simon Simmers.
"Vern's appointment is a great example of our home-grown coaching talent gaining valuable experience offshore, before returning to New Zealand to continue their contribution to the development of our people and competitions.
"Vern's coached internationally at Rugby World Cups and knows what it takes to win titles in Europe. He will bring all those insights and knowledge back to the Blues and Super Rugby Pacific. It's great to have Vern home," Simmers said.