The club praised Dyche's ability to guide the team through its next chapter, citing his experience in managing over 330 Premier League matches and building teams with strong defensive organization and resilience.
Dyche also has a deep understanding of the values and pride of Forest and its supporters, as he is a local who played for the club's youth team.
He has signed a contract until summer 2027, becoming the team's third manager of the season. Dyche's appointment is seen as a positive opportunity for a successful and competitive season in both domestic and European competitions.
Former Tottenham boss Postecoglou only held the position for 39 days, as he was let go with no wins from eight games. This was the shortest permanent managerial reign in Premier League history.
Owner Evangelos Marinakis and chief Edu Gaspar had considered other candidates, including ex-Manchester City manager Roberto Mancini and Fulham's Marco Silva, but Dyche emerged as the frontrunner.
Dyche has been out of work since January after leaving Everton following a two-year stint at Goodison Park. He kept the Toffees in the Premier League in 2023/24 despite points deductions for breaches of the Premier League's financial rules.
Prior to that, Dyche managed Burnley for nine and a half years, bringing regular Premier League football to Turf Moor.