The sides agreed to a three-year deal, a source said.
"We are excited to have Lane join our staff," Alabama coach Nick Saban said in a statement. "He is an outstanding and creative offensive coach who has great experience both at the college and NFL level.
"He has a very good understanding of the game and I have always been impressed with what I saw in the games he called. He coaches with a great deal of passion and enthusiasm, and also does an excellent job as a teacher."
Kiffin was fired as coach at USC in late September after a 62-41 loss at Arizona State. He finished with a 28-15 record in three-plus seasons with the Trojans following a one-year stint as coach at Tennessee in 2009, when he went 7-6 and nearly upset Saban's then-No. 2-ranked Crimson Tide in Tuscaloosa.
Saban invited Kiffin to Tuscaloosa last month to visit the football program and evaluate the offense. Kiffin stayed in town for nearly a week, and Saban told reporters during his visit how much he respected him as a coach of offense.
While at USC in 2011, Kiffin's offense produced a 3,500-yard passer, a pair of 1,000-yard receivers and a 1,000-yard rusher.
"I've always had the utmost respect for what Coach Saban has done with his programs," Kiffin said in a statement. "Having the unique opportunity to be here last month, I was able to meet some of the great players and the great people in the organization, and I'm very excited to start working with them. We've seen the passion and support of the Alabama fans firsthand, and when that's combined with the storied history and tradition of the program, this is a very special place to coach."
On Thursday, Doug Nussmeier left Alabama to become offensive coordinator at Michigan.
His hiring creates a high-profile pairing with Saban, who along with defensive coordinator Kirby Smart has routinely fielded one of the nation's best defenses while also putting up solid numbers with a pro-style offense.
Kiffin was part of two national championships as a USC assistant under Pete Carroll. He ran the offense from 2005-06 and was passing game coordinator the previous year, when quarterback Matt Leinart won the Heisman.
The Trojans averaged 49.1 points and 579.8 total yards per game when Kiffin was offensive coordinator.
The Tide's lone meeting with Kiffin's Volunteers proved pivotal during the 2009 national championship season. Terrence Cody blocked two field goals in the fourth quarter to preserve a 12-10 Alabama win and the Tide's title hopes.
Kiffin did run afoul of SEC commissioner Mike Slive during his stay at Tennessee. After Kiffin was publicly dismissive of his second reprimand from the league, this one for criticizing officials, Slive issued a letter warning him that further such comments from he or his staff would lead to a suspension from at least one game.
Kiffin had questioned why officials didn't penalize Cody for unsportsmanlike conduct when the defensive lineman removed and threw his helmet after his second block on the game's final play.
He also said at the time that he decided to let the clock run down instead of trying to run another play before the kick because he was concerned about the officiating.
No terms of the deal with Alabama were released, pending formal approval by the university's board of trustees.
ESPN.com's Chris Low and ESPN's Joe Schad contributed to this report. Information from The Associated Press was used in this report.