The 40-year-old American, who began his coaching career with the Los Angeles Galaxy in 2011, will serve as sporting director and control all player personnel decisions.
"Gregg's strong vision, passion, work ethic, intelligence, data-driven decision making, broad soccer network and playing credentials separated him throughout this search," Crew chairman Anthony Precourt said.
Berhalter replaced interim coach Brian Bliss, who succeeded Robert Warzycha midway into the just-concluded MLS regular season. Bliss had served as the Crew's prior technical director.
"I aim to bring a style of play that resonates with our supporters and results that will make the city proud," Berhalter said.
"I am eager to get started and my immediate priority is to reach out to the players and share our new vision for the club as we move forward."
Berhalter played for 18 seasons in Europe -- having spells with among others English sides Crystal Palace and German outfit Energie Cottbus -- as well as the Galaxy and won 44 caps, including being in the 2002 and 2006 World Cup final squads.