New Zealand Rugby announced Brown's appointment today.
Brown, who has been assistant coach to Jamie Joseph since 2014, will be joined next year by fellow former All Blacks Scott McLeod, who will continue as assistant coach, and Mark Hammett, who is set to return to the South Island as a new assistant coach with the franchise.
A former coach of Otago and Japanese club the Panasonic Knights, Brown will return to Japan in 2018 to take up a role with the Japanese national team.
Highlanders CEO Roger Clark said: "We are delighted with this appointment, we said at the outset that we were looking to replace Jamie Joseph with a proven coach with a successful track record and we certainly believe Tony fits that description.
''Ideally we would have liked his appointment to be longer, however we are excited by the coaching group we have appointed for 2017 and are confident we will find a quality replacement for Tony in the time frame we have available."
McLeod and Hammett, who is currently coaching new Super Rugby club the Sunwolves, have both signed through to 2019.
Brown said he was excited and humbled at the opportunity to take the top job for the 2017 season.
"I wasn't sure the timing was right for me, but having spoken to people inside and outside the organisation, I know now that this is too good an opportunity to pass up.
''Knowing that I will have Stormy (McLeod) and Hammer (Hammett) with me was an important part of the decision and I'm excited at the prospect of working with them next year."
New Zealand Rugby General Manager Rugby, Neil Sorensen welcomed the appointments as a fantastic outcome for the Highlanders and their fans.
"It's outstanding that Brownie is stepping up to the Head Coach role, as he incredibly well regarded by players and management alike. While we would have loved to have had him commit for longer, we're also excited for him knowing he's got Japan to look forward to as they prepare to host the 2019 Rugby World Cup.
