Wells links up again with his former England colleague Mike Ford and the Falcons' new director of rugby Gary Gold.
Newcastle are nine points adrift of Wasps at the bottom of the Aviva Premiership table.
"I am incredibly delighted that John Wells has decided to come on board with the club," Gold said.
"He is a world-class coach with a wealth of experience and he had a fantastic effect during his time at England.
"His appointment is a real demonstration of intent from club owner Semore Kurdi about the importance of keeping top-flight rugby in the north east.
"It is going to be a difficult job to keep Aviva Premiership rugby in the north east and we are in an unfortunate position in the league but we must focus on what we can control."
Wells spent six years on the England coaching staff and helped the national team to the 2007 World Cup final and last year's RBS 6 Nations title.
The 48-year-old former Leicester boss left his Twickenham post along with Ford, attack coach Brian Smith and manager Martin Johnson after England's quarter-final defeat at last year's World Cup.
"This is a great opportunity for me and I am looking forward to the challenge of helping the club secure its top-flight status," Wells said.
"Newcastle Falcons is a big club which should be challenging for European Cups and Premiership titles. I am used to working in pressurised environments when every game is a cup final and that is the case between now and the end of the season."
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