Former Australian prop Stiles had been an interim co-coach of the Reds in 2016 with Matt O'Connor before he got the head coaching role.
The Reds won just four games last season and Stiles was outspoken in his criticism and frustration at his players' performances and at times off-field behaviour.
"Queensland Rugby Union (QRU) was disappointed with the performance of the Queensland Reds in 2017 and we believe we require a catalyst for change in culture, discipline and standards," QRU chief executive Richard Baker said in a statement announcing the coaching change.
"We feel strongly that Brad Thorn is the right person to lead this change and that his appointment as head coach is the necessary catalyst for that change.
"Brad has a proven track record of success as both a player and a coach. He is without peer when it comes to the culture and professionalism required to be successful at the highest level of our sport and he is enthusiastic about moving the Reds forward and creating a winning culture at Ballymore once again."
New Zealand-born Thorn represented Australia in rugby league and had a storied career with the Brisbane Broncos before he switched codes and eventually played 59 tests for the All Blacks and won the 2011 Rugby World Cup.
Widely considered the ultimate professional rugby player, he did not end his professional playing career until 2015, at the age of 40. He also played semi-professional rugby in Australia last year as a player-coach within the Queensland system.
Thorn joined the Reds as forwards coach in 2015 and also coached the Queensland under-20s and Queensland Country.
"I believe actions speak louder than words," Thorn said.
"I feel I'm contributing to a change in culture and standards in those teams and I look forward to continuing to contribute to this organisation and the success of the Reds."
Former Melbourne Rebels coach Tony McGahan had already been appointed to the Reds coaching staff and will continue to assist Thorn.
The Reds open their 2018 Super Rugby season against the Rebels in Melbourne on Feb. 23. (Reporting by Greg Stutchbury in Wellington; Editing by Sudipto Ganguly)