The 45-year-old Englishman, who succeeds Steven Naismith, previously coached the Liverpool Under-18s and Under-23s and has since managed Blackpool and QPR.
He briefly worked as assistant to Steven Gerrard when the former Liverpool and England midfielder was in charge at Aston Villa.
Hearts chief executive officer Andrew McKinlay told the club website: "I'm very happy to be able to welcome Neil to Hearts.
"We've made no secret of the fact that analytics has guided our search for a new manager, and that data presented us with many top quality options including Neil."
He added: "Neil understands well what we are looking to do, has experience at big club environments, none more so than at Liverpool, and is an ambitious coach with a desire to lead his teams to the top."
Edinburgh-based Hearts, who finished third in the Scottish top flight last season, are bottom of the Premiership with two points from eight games.
