Galatasaray conducted an extensive search for a new manager following the departure of former Manchester City boss Roberto Mancini who left Istanbul after less than a season amid reported differences over transfer policy.
"My aim to to develop a winning team," said Prandelli at the signing ceremony in Istanbul, impressing his hosts with some opening pleasantries in Turkish. "Not just a team that plays well but to form a team that only wins," he added.
The Turkish league kicks off at the end of August with Galatasaray seeking to overcome eternal Istanbul rivals and last season's champions Fenerbahce. With Fenerbahce disqualified due to a match-fixing scandal, Galatasaray are taking Turkey's automatic Champions League spot for 2014-2015 as last year's runners-up.
Prandelli, 56, oversaw Italy's failed World Cup campaign in Brazil which started promisingly with victory over England but ended in a first round exit. He resigned immediately after defeat to Uruguay meant Italy failed to make it to the knockout stages.
He said he had not been actively looking for work after the World Cup but had been impressed by the ambition of Galatasaray's president Unal Aysal. "I didn't have a particular team in my mind when the World Cup was coming to an end," said Prandelli.
"I wasn't planning to sign a deal with a team. Then I met with the president and realised that the only thing he wants is success in sports. I wanted to see how I would perform and said yes."
Galatasaray had held talks with the sacked Manchester United boss David Moyes and had also expressed interest in top German coaches like national team chief Joachim Loew and US national coach Juergen Klinsmann. There has meanwhile been uncertainty over the future of Galatasaray's star Dutch midfielder Wesley Sneijder, who has shone with the Netherlands at the World Cup in Brazil.
Aysal said that Sneijder was free to leave if the price was right. "There is a clause in his contract stating that he could be released in return for 20 million euros. If any club pays us this money and if he (Sneijder) is willing to leave we can't force him to stay," he said.