He will replace Rahman Gumbo, who resigned from the position last week after failing to lead Zimbabwe to next January's Africa Cup of Nations (CAN) tournament in neighbouring South Africa.
Gumbo, a former national team player, was only appointed coach in March following the suspension of Norman Mapeza for his involvement in a match-fixing scam involving the national team playing unsanctioned games in eastern Asia.
Zimbabwe failed to qualify for the CAN after losing 0-2 to Angola in the qualifying stage. The team won 3-1 in the first leg in Harare but lost on aggregate because of the away goals rule.
"The Zimbabwe Football Association settled for the German Coach, given the existing government-to-government cooperation which would see the Association engaging a highly qualified coach in the shortest possible timeframe," the ZIFA board said in a statement.
"The Association will however continue on a hunt for a highly qualified coach who should take charge of the Senior National Men's future Campaigns in the long term."
Pagels, ZIFA's technical adviser before his appointment was "seconded to the Zimbabwe Football Association in 2011 by the Germany Olympic Committee", ZIFA said.
Zimbabwe appoints Klaus Dieter Pagels as new football coach
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