The former Ireland full-back will take over in the summer after he completes the season with Harlequins.
The 45-year-old played 35 times for his country before going into coaching with London Irish and then Harlequins with spells at the RFU and English institute for sport in between.
The Azzuri failed to make it past the pool stages at last years World cup and lost all their games in this Six Nations.
O'Shea will be joined on the coaching ticket by former England star Mike Catt.
