King, who is in his fifth season as assistant coach of the French giants Clermont Auvergne, will join Northampton in the summer.
Grayson's sudden departure from the club in November, after 19 years as a Saint, left a vacancy in the management team alongside director of rugby Jim Mallinder and forwards coach Dorian West.
Mallinder said the club had been "inundated" with applications but that King's experience, first as a player and now as a coach, made him the stand-out candidate.
"I'm very excited about the prospect of joining Northampton Saints, which is one of the biggest clubs in Europe," King said.
"In Jim Mallinder, the Saints have a director of rugby that I respect greatly and a good, young team with plenty of talented English players. I hope that I'll be able to help bring success to Franklin's Gardens.
"I've had an amazing six years in France as a player and a coach. I have learned a great deal by working with great coaches like Vern Cotter, Joe Schmidt and Franck Azema.
"I feel that I am more knowledgeable about the sport and hopefully I can bring that to Northampton.
"It's the right time for me to come home to England and to a club like the Saints, which has a very bright future under Jim's leadership."
King won 32 England caps and played a key role in Wasps becoming the dominant team of their era, winning two Heineken Cups, four league titles and three domestic cups.
After finishing his playing days with Clermont, King moved into a coaching role and helped the club win their first French title in 2010. This year they are strong Heineken Cup contenders.
"We have been inundated with applications from coaches over the past few weeks, but I believe that Alex is the right person to help us move forward as a group," Mallinder said.
"As a player he was part of an excellent London Wasps team and as a coach he has helped Clermont Auvergne become one of the top clubs in Europe.
"He has built up a considerable amount of experience in a short space of time and is a coach who has some exciting ideas."
Mallinder also confirmed a dual role for Alan Dickens, who will join the first team coaching group and continue as academy manager.
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