Di Canio, 44, will be charged with arresting a winless run of eight games that has left the Wearsiders just one point above the Premier League relegation zone.
Speaking via statement on the club's official website, Sunderland chairman Ellis Short said: "Paolo is hugely enthused by the challenge that lies ahead of him. He is passionate, driven and raring to get started.
"The sole focus of everyone for the next seven games will be to ensure we gain enough points to maintain our top-flight status. I think that the chances of that are greatly increased with Paolo joining us.
"Our fans have shown tremendous patience and understanding this season. They have continued to back the team in huge numbers, both home and away, and that is something that continues to inspire all of us in our drive to give them the successful club they deserve. That remains our primary aim."
The decision has already caused considerable controversy, however, with non-executive vice chairman David Miliband stepping down from his position as a consequence of Di Canio's arrival.
Formerly a Labour MP in South Shields, Miliband recently took up a job with a New York-based charity and confirmed his departure via his personal website, suggesting that Di Canio's openly facist sympathies were responsible for his decision.
"I wish Sunderland AFC all success in the future," Miliband said. "It is a great institution that does a huge amount for the North East and I wish the team very well over the next vital seven games. However, in the light of the new manager's past political statements, I think it right to step down."
Meanwhile, former Sunderland defender Michael Gray is pleased to see the club move swiftly in appointing O'Neill's successor. While the full-back believes Di Canio will help Sunderland maintain their Premier League status, he concedes that it is time for the players to step up and perform.
"He's a pretty similar character to Martin O'Neill, he wears his heart on his sleeve," Gray told ESPN. "In his interviews he's very charismatic so it's going to be interesting to see his first press conference, but I'm certain he'll get a reaction from the players and I really hope he does well. I think he'll keep them up. It's a tough ask but I think there's enough quality there to keep them in the Premier League.
"I'm just pleased Sunderland have appointed someone pretty quick after the departure of Martin O'Neill. He's got a character and I think that's what Sunderland need but I'm more interested in what the players have got to offer. It's great us keep appointing these managers all the time but at the end of the day it's about the 11 players that cross that white line. If the manager can get the best out of them then I'd be very happy whoever is in charge.
"I think he's got to go into the Sunderland training ground and he's got to drill it into the players that they've got to hit the ground running because they've got seven cup finals that are going to keep them in the Premier League for another season. What I think they've got to do then is reassess and look at the squad as a whole and I think there has got to be wholesale changes."