Parcells, who will work for ESPN through Monday, Dec. 24, is expected to hold a news conference Dec. 27 at the Dolphins' facility.
Parcells will oversee the club's football operations and report directly to owner Wayne Huizenga. The move becomes official one day after Parcells with the Atlanta Falcons.
"Bill's accomplishments put him among the most successful head coaches in NFL history, and this position was created to take advantage of his unique background and expertise," Huizenga said in a statement. "We all know the respect that he has around the NFL. He has a proven track record of success everywhere he has been in the National Football League, and his football acumen will help put the Miami Dolphins franchise back among the elite of the NFL."
On Wednesday, the expectation around the league was that Parcells would take over in Atlanta, with even some reports saying the deal was done. By the afternoon, however, the deal fell apart and the Dolphins moved quickly to get Parcells to sign a contract.
"I'm honored to join such an illustrious franchise as the Miami Dolphins and to work for one of the best owners in the league in Wayne Huizenga," Parcells said. "He shares my same commitment to winning and I told him I would do everything I can to help turn around the team's fortunes.
"I respect what the Dolphins name means –- the legacy of the Perfect Season, and people like Coach Shula, Dan Marino and so many others who have made the team one of the most successful franchises in the NFL. I'm looking forward to helping restore that winning tradition."
The team made the announcement shortly after the locker room was closed for the day, and roughly 45 minutes after Dolphins coach Cam Cameron sidestepped at least a half-dozen questions about Parcells -- even refusing to say if he's ever met the coach.
"There will potentially be a time to have that discussion," said Cameron, who along with GM Randy Mueller will report to Parcells. "Today, I don't see it as being that day or this time."
Known best for a gruff demeanor and colorful quotes, Parcells left coaching with the ninth-most wins in NFL history and a career record of 183-138-1. He was 34-32 in Dallas, including 0-2 in the postseason.
The Associated Press contributed to this report.