Parma have appointed the 2006 World Cup winner on a contract running until the end of the 2026-27 season, with the club holding an option to extend the agreement by a further two years.
The decision comes after a difficult opening to the campaign for Parma, who had collected just one victory from their first five league matches and were 15th in the Serie A table when Cuesta was dismissed.
Gilardino had been without a club since leaving Pisa in February and now returns to the club where he established himself as a prolific young striker.
The former Italy international spent three seasons with Parma between 2002 and 2005, making 116 appearances and scoring 56 goals.
Parma highlighted that history when announcing his appointment, with Gilardino now returning to the club in a completely different role.
His coaching career has included spells with Rezzato, Pro Vercelli, Genoa and Pisa, giving him experience in Italian football before the opportunity to return to Parma emerged.
Manchester City manager Enzo Maresca, who has a personal friendship with Gilardino, has also welcomed his former colleague's appointment.
“Alberto is a good coach. Whether he is the right man for Parma, only time will tell. I sincerely hope for his sake that he is,” Maresca told Corriere dello Sport.
The two men remain close away from football and even spent part of the summer on holiday together with their wives.
“We have a friendship that goes beyond football. This summer we spent a few days on holiday together, with our wives. I hope he does well for him and for Parma, a club I also follow from Manchester. My daughter was born there, so part of us loves Parma and Parma.”
Gilardino will have an early opportunity to work with his new squad during the international break.
Parma are scheduled to face Serie B side Virtus Entella in a friendly at the Mutti Training Center in Collecchio on Friday, October 2.
The match will give Gilardino his first chance to assess the squad in a match situation before the Serie A campaign resumes.
His coaching staff will include Gaetano Caridi as assistant coach, Francesco Valiani as technical collaborator, Antonio Bovenzi as fitness coach and Mirco Vecchi as match analyst.
Nicola Pavarini will remain as goalkeeper coach, while Simone Salvo, Valerio Persichetti and Manuel Morabito are also expected to continue in their existing roles.