Ferguson, 38, replaces Gary Johnson at the helm at London Road - where he enjoyed back-to-back promotions before leaving in November 2009.
Johnson left the npower League One club on Monday night after disagreements with chairman Darragh MacAnthony and Posh have decided to re-appoint one of the most successful managers in their history.
Ferguson, who has signed a four-and-a-half-year contract, was dismissed by Preston North End just after Christmas but has the chance to take Posh up for a third time after they moved back into the play-off places with a 2-1 win over Brentford last night.
Source: PA
Source: PA