Former Real Madrid boss Bernd Schuster will succeed Manuel Pellegrini as coach of Malaga, German sports news agency SID, an AFP subsidiary, said on Thursday.
La Liga is familiar territory for the 53-year-old, who played for Barcelona, Real and Atletico Madrid, and as a coach guided Real to the 2008 league title.
The former Germany international has been out of work since leaving Turkish side Besiktas in March, 2011.
Outgoing Malaga manager Pellegrini said he has a verbal agreement to become the new boss of English giants Manchester City.
Under Pellegrini, Malaga finished sixth in the league last season, and made it to the Champions League quarter-finals where they were beaten by Borussia Dortmund.
But Malaga are banned from playing in the Europa League next season as a result of a one-year ban for infringing UEFA's financial fair play regulations.