After leaving Leicester to move to Lancashire he will take charge of the struggling side for the first time on Sunday when they face Aston Villa at home.
Chairman Phil Gartside said: "We feel Gary is the right man to take Bolton forward. I have paid particular attention to his career and he has demonstrated to me he is prepared to roll his sleeves up. He has the right temperament for a battle, which this season is undoubtedly going to be."
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