The 43-year-old was in charge of the Proteas from 2005 until 2010 and had most recently been coaching Western Australia. His contract runs until after the 2015 World Cup, to be jointly held by Australia and New Zealand.
Arthur was presented at a media conference at Cricket Australia's headquarters in Melbourne, just hours after his new charges completed a tense two-wicket victory over his old team in Johannesburg.
He replaces former coach Tim Nielsen who resigned after the Australian tour of Sri Lanka in September. Troy Cooley had been in charge on an acting basis for the tour of South Africa.
First foreigner
"I don't think it'll matter," Arthur told reporters about being the first foreigner to coach the side, before adding he would look to seek permanent residency status in Australia.
"Ultimately, I guess you want a guy that is perceived to be the best for the job, irrespective of the nationality."
Arthur beat out the challenge of former New Zealand coach Steve Rixon, who is the current fielding coach for the Australian side and was considered one of the favourites for the top job.
His appointment was the latest in a restructuring of the outfit that included the appointment of former Australia rugby international Pat Howard as CA's general manager for team performance and a revamp of the selection panel.
Quality opportunities
Former chairman of selectors Andrew Hilditch and selector Greg Chappell were both ditched with John Inverarity named new full-time chairman of selectors, with former test players Rod Marsh and Andy Bichel as part-time selectors.
Captain Michael Clarke and Arthur will also act as selectors, while Arthur also takes an overall strategic view of the national team and will work with state coaches to aid in player development and pathways to the top level.
"I think it's a very exciting time," said Arthur.
Exciting phase
"Australian cricket is in a very exciting phase (but)... getting to the top of the test rankings is something that just doesn't happen, because you need sustainable success over a period of time.
"We need a real good, strong squad system. I think young players need to be given quality opportunities to develop their games under pressure and hopefully we can create that environment for them to all perform."
Arthur's first series in charge will be a two-test series against New Zealand, starting in Brisbane on December 1, before Australia host India for a four-test series starting on December 26.
Senior players
Questions have already turned to the future of senior players under Arthur's reign, with local media suggesting former captain Ricky Ponting's career could be ended at the conclusion of the series against India, if not sooner, though Arthur would not be drawn on the issue.
"We'll meet with John Inverarity and Michael Clarke down the line so I'll defer that (decision) to John Inverarity and the selection panel," Arthur said.
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