Dutch legend and former Newcastle United manager Ruud Gullit will act as his assistant.
It makes the Little General his country's oldest ever national coach.
The defeat in Sofia left the side fourth in qualifying group A, trailing six points behind leaders France. He started as assistant of national team coaches Rinus Michels and Leo Beenhakker from 1984 until 1987, and from 1990 until 1992 he was once again assistant of Michels.
Fred Grim will remain in interim charge until Advocaat and Gullit join together, which looks likely to be when Fenerbahce's involvement in the Turkish Cup is over.
Blind was sacked after their 2018 World Cup qualification defeat to Bulgaria in March this year, with the team now sitting fourth in Group A, with just seven points from five games, six points behind leaders France.
The Netherlands, three-time World Cup runners-up, have endured a tough time in recent years, failing to qualify for Euro 2016 in France and now facing the prospect of being a humiliating World Cup no-show.
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Together with Henk ten Cate, now the coach of Al Jazira in the United Arab Emirates, Advocaat finally was the main candidate to do the job. His departure as assistant previous year? Ten Cate even got the offer to be the head coach, but after one day KNVB's Hans van Breukelen backed down and moved to Advocaat as the number one option. "We had two options".
Advocaat and Gullit have been appointed until the end of Netherlands' qualifying campaign, with qualification set to extend their stay with the Oranje.
"I never promised Ten Cate anything".
In his first spell in charge, Advocaat took the Netherlands to the quarter-finals of the World Cup in the United States in 1994, where they lost to eventual winners Brazil.
The vastly experienced Advocaat has previously coached Russia, Belgium and Serbia, as well as club teams including PSV Eindhoven, Glasgow Rangers, Zenit St. Petersburg and Sunderland. Only the group victor is guaranteed a place at the World Cup.
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