The 47-year-old quit Portsmouth on Friday after Forest agreed a ?300,000 compensation package and he has signed a three-and-a-half year deal.
Cotterill said goodbye to Pompey players and staff before travelling to the east Midlands, where he finalised the details of his move.
On the move: Cotterrill has agreed to take the Forest job
Cotterill spent 15 months in charge at Portsmouth following a brief spell in charge at Notts County, but Forest's interest has undoubtedly come at an opportune time for him as he was under pressure after securing just two wins in Portsmouth's opening 10 games this season.
Despite Frank Clark's arrival as Forest's new chairman, the appointment of Cotterill raises questions as to who took the decision. Clark said just 24 hours earlier that 'no-one was in touching distance' of the post. With owner Nigel Doughty standing down from the chairmanship, it appears this was his last act before making way for Clark.
Clark told Forest's website: 'I'm really excited about the appointment. Steve was always at the top of the list and he fits the criteria that weset out when I first started looking at this with the board last week.
All change: Clark became the new chairman after McClaren exited
'He's enthusiastic, he's hungry, he's got a terrific CV and he's experienced at this level. He was everything we were looking for.'
Upon leaving Portsmouth's training ground, Cotterill said that joining Forest was an opportunity he could not let pass by. 'I had a fantastic relationship with people at Portsmouth and I will miss it,' he said. 'It's not been an easy decision and was only finalised this morning whencompensation was agreed.'
Portsmouth expressed their gratitude for Cotterill's work, stating: 'Portsmouth Football Club would like to thank Steve for his efforts during his 16 months at Fratton Park.
'Coaches Stuart Gray and Guy Whittingham will take charge of first team affairs for Saturday's npower Championship encounter with Barnsley as the club conducts its search for a new manager.
Cotterill is not expected to take the reins immediately and McClaren's assistant, Rob Kelly, has prepared the team for today's clash at Coventry.
Plenty to ponder: Cotterill's task is to lead Forest up from the foot of the table
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