The 56-year-old was named Wednesday afternoon as Sam Allardyce's replacement, for his second stint in charge, having led them from 1992-97.
"It's nice to be home. I'm delighted to be back," Keegan told Sky Sports.
The former England, Manchester City and Fulham manager became a cult hero at Newcastle when he helped them win promotion to the top flight in 1984, having played the last two seasons of his career there.
He returned as manager in 1992, leading the club close to becoming Premier League champions in 1995-96, when they let slip a 12-point lead at Christmas as Manchester United pipped them for the title.
Keegan had suggested recently that he would never be a manager again, but it seems the lure of a return to his beloved Newcastle United was an offer he simply could not refuse.
Newcastle Chairman Chris Mort said: "I think we've got the right man in the end. We didn't think we'd be able to get Kevin back to the club, but he's the right man, and we're absolutely delighted."
There has been talk of former England captain and another Newcastle hero, Alan Shearer, working alongside Keegan.
The former striker, now working as a television pundit, told the BBC he had not thought of himself as a No 2 but would listen to anything Newcastle and Keegan had to say.
"First and foremost, I'm not sure he has even thought about it - he probably wouldn't have had time," Shearer told the BBC.
"He is his own man and will make his own decisions. But it is my club. If he was to ring up and ask to speak to me, I would speak to him. ... I would be foolish not to."