Vidmar, who made 76 Socceroos appearances and played professionally in Europe for more than a decade, coached City youngsters Stefan Mauk and Daniel Arzani during his time in the junior national teams' set-up.
"From everything I have seen, Melbourne City is a club with great ambition and determination," Vidmar, who starts his new role on Monday, said in a club statement.
"It's one year since they won the first men's trophy, and I hope to be part of further success in the coming season."
Amid recent discontent -- including Socceroos star Tim Cahill voicing his concern about a lack of game time and the departure of former interim coach Valkanis -- Englishman Joyce remained focused on stamping his authority on a club yet to fulfil their lofty ambitions.
The addition of 47-year-old Vidmar should alleviate some of the anxiety around the club, although the January transfer period is likely to result in personnel changes.
The signing of US-based Australian defender Harrison Delbridge means at least one player will leave next month, with the likes of last season's player of the year Neil Kilkenny and young defender Ruon Tongyik rarely sighted in 2017/18.
After a strong start to the A-League season under Joyce that brought four wins from as many games, City had not won in their past four, before a 2-1 win at Newcastle lifted them within a point of the second-placed Jets.
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