Sanchez had acted as consultant for the last four games of the campaign, winning two and drawing one as the Bees avoided relegation against the odds.
Giuliano Grazioli, the former Bees striker, will be his assistant, having managed Barnet in the period Sanchez was consultant.
Not such a dodgy Barnet: Lawrie Sanchez is the new manager of League Two's Barnet
Barnet chairman Tony Kleanthous said: 'I am absolutely delighted. We found the successful combination when we needed it and it is great that we are able to continue that next season. I believe that Lawrie, with Grazioli backing up, is the right man to lead us forward.'
The 51-year-old began his management career at Sligo Rovers and once guided Wycombe to the FA Cup semi-finals.
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