The 44-year-old replaces Mark Robins, who departed the club on the opening weekend of the season following a 4-0 defeat to Bournemouth.
Powell was in charge of Charlton for three years, guiding them to the League One title in 2012, but was sacked in March following a disagreement with new Valley owner Roland Duchatelet.
The former England international's first game at the helm will be at home to Middlesbrough a week on Saturday.
We’re delighted to be able to welcome Chris to Huddersfield Town as the new manager
Dean Hoyle
Chairman Dean Hoyle said: “We’re delighted to be able to welcome Chris to Huddersfield Town as the new manager.
“As I said when the process began, I felt it was important that we found a Manager who had ‘done it’ and Chris certainly fits that bill.
"He has ‘done it’ by guiding Charlton to promotion to the Championship and then finishing ninth in the 2012/13 Championship season – all achieved on a limited budget by getting the best out of his players.
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