The veteran boss, 61, replaces Jim McIntyre at the helm and faces a battle to keep the Fife club in the Clydesdale Bank Premier League.
Jefferies has been out of work since parting company with Hearts just three games into the season and now finds himself plunged into a relegation battle.
He was initially offered a short-term contract to take charge of team affairs for the remaining eight games of the campaign but has now been recruited on a longer deal.
Speaking at a media conference, chairman John Yorkston said: "The board of Dunfermline are delighted to welcome Jim Jefferies as the new manager.
"Jim has a great track record of developing players and bringing on players and we are delighted to have him.
"Jim has signed on a rolling contract of minimum 15 months which means he is here for the remaining eight games plus the following season and then it's a rolling contract thereafter."