Queiroz, who fills the post left vacant by Brazilian Luiz Felipe Scolari, will sign a four-year contract. He is scheduled to be formally presented at a news conference on July 16.
"I am very proud and honoured to be able to go back and serve my country," Queiroz said.
"This is a very special position that any professional would want.", he added.
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"The first big objective is to qualify for the World Cup in South Africa (in 2010)."
His first game in charge will be a friendly against Faroe Islands next month ahead of their World Cup qualifying campaign against Sweden, Denmark, Hungary, Albania and Malta.
Scolari stepped down after Euro 2008, following 5-1/2 years in charge, to join Premier League Chelsea who will again be one of the main challengers to champions United for the title.
United tried hard to keep their assistant manager at the club but must now prepare for the campaign without Queiroz, who added: "I want to thank Manchester United for the agreement reached, which made my return to Portugal possible".
His first spell in charge ended when the country failed to qualify for the 1994 World Cup finals but FPF president Gilberto Madail said he was delighted with the appointment.
"Carlos is without doubt a benchmark of excellence for Portuguese football coaches and my first choice for the job," he said.
Since his first spell in charge of his country Queiroz has enjoyed mixed success in coaching and management.
Short stays with the New York Metrostars, Japan's Grampus Eight and the United Arab Emirates preceded a stint in charge of South Africa who he helped qualify for the 2002 World Cup.
However, he left in March before the finals in South Korea and Japan after a quarter-final exit at the African Nations Cup and a dispute with the team's technical director, Jomo Sono.
Queiroz then became assistant manager alongside Alex Ferguson at Manchester United, who won the English Premier League title at the end of his first season in 2002/03.
His contribution caught the attention of Real Madrid who appointed him as manager for the 2003-04 season, but after a good start he was sacked following an early exit from the Champions League and a fourth place Liga finish.
Queiroz returned to his old job as Ferguson's assistant at United the following season and went on to help the club win a Premier League and Champions League double last term.
"Carlos is one of the best coaches in world football," Ferguson said on United's website.
"His attention to detail, ability to innovate and will to win have been a key factor in the team's recent successes. He has played an important role in building and blending the exceptional squad of players at the club," he added.
Carlos Queiroz factfile
* Born March 1 1953, Nampula, Mozambique. Educated at the University of Lisbon. After a playing career in Mozambique, joined the Portuguese Football Federation with responsibility for youth development, nurturing the "golden generation" including Joao Pinto, Luis Figo and Rui Costa.
* Appointed assistant coach at Estoril in Portuguese second division in 1983.
* Joins the FPF as an assistant coach for the youth teams and assumes overall control in 1987.
* His team win the 1989 under-20 World Youth Championship in Saudi Arabia and retain the title two years later in Portugal.
* Succeeds Artur Jorge as Portugal coach but stands down after they fail to qualify for the 1994 World Cup in the United States. Leaves for Sporting Lisbon, who finish third in the league and then runners-up in his two full seasons in charge.
* Joins New York MetroStars as head coach in May 1996 before going to Japan to manage Grampus Eight but returns to America in 1997 as a consultant for the U.S. Soccer Federation.
* After a brief spell coaching the United Arab Emirates, becomes only the second foreigner to manage South Africa helping them reach the 2002 World Cup in South Korea and Japan. Quits before the finals after a 2-0 loss to Mali in the African Nations Cup quarter-finals and a dispute with the team's technical director, Jomo Sono.
* Joins Manchester United as assistant coach to Alex Ferguson on a three-year contract playing his part in the successful 2002/03 Premier League campaign.
* Leaves United to coach Real Madrid but is dismissed as Real finish the 2003-04 Primera Liga season in fourth place.
* Rejoins United as assistant coach under Ferguson on July 1 2004, playing a key role in helping the English side win the Premier League and Champions League double last season.
* Appointed Portugal coach on July 11 to fill the post left vacant by the departure of Brazilian Luiz Felipe Scolari after Euro 2008 to manage United's rivals Chelsea.
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