The 47-year-old, who made 168 top-flight appearances for the Giallorossi between 1997 and 2001, had stepped down from his post at the Mapei Stadium earlier in the day.
Di Francesco has agreed a two-year deal in the Eternal City to replace Luciano Spalletti, after he recently took over the reins at Inter Milan.
The Pescara native spent five seasons with the Neroverdi, which saw them win promotion to Serie A and qualify for the Europa League during his tenure.
Roma president Jim Pallotta believes the appointment could finally end their long title drought and Juventus' dominance in Italian football.
"When we sat down to discuss the ideal candidate for the role of Roma coach, we wanted someone who could come in and get the very best out of our first-team players and also help bring through some of the great young talent coming out of our academy," Pallotta said in a statement.
"Our new sporting director Monchi singled out Eusebio Di Francesco and, with his style of play, we believe he's the right fit for Roma."
Di Francesco added: "I am extremely happy to be able to return to Roma, to coach a club that has always meant a lot to me. I am grateful to president Pallotta and all the directors for this opportunity.
"I will give everything I have to make sure this team gets the results it deserves."
A statement from the Modena outfit read: "The Sassuolo Calcio, while respecting the agreements signed, announces that it has terminated prematurely by mutual consent the relationship with coach Eusebio Di Francesco.
"They were unforgettable five years, five years of memorable victories and dreams realised. Every other word would be superfluous.
"Thank you, we just wish you a future full of success and satisfaction. You're one of us, always!"