The 48-year-old joins the League One strugglers on a two-and-a-half year deal, replacing Phil Brown who was put on gardening leave last Wednesday after seven league defeats in eight games.
It's a return to Roots Hall for Powell, who made 290 appearances for the club during a six-year spell between 1990 and 1996 before going on to play for Derby County , Charlton Athletic, West Ham United , Watford and Leicester City.
Powell’s management career began in January 2011 with Charlton before joining Town in September 2014 where he steered the Terriers to SkyBet Championship safety.
After being dismissed by the Terriers in November 2015, Powell became assistant manager to Steve McClaren at Derby and temporarily took charge when the former England boss was sacked in September 2016.
Southend are currently 20th in the table, one point above the drop zone with Powell's first game in charge against Scunthorpe United at home this Saturday.