Newcastle have appointed Steve Bruce as head coach on a three-year deal.
Sheffield Wednesday will receive around £4m in compensation from Newcastle and it is understood the Owls asked Newcastle to include players as part of the deal, which Newcastle refused.
The 58-year-old Tyneside native, who it is understood was not on Newcastle's original shortlist for the job, will be joined at St. James' Park by coaches Steve Agnew and Stephen Clemence.
Bruce said: "I'm delighted and incredibly proud to be appointed as head coach of Newcastle United. This is my boyhood club and it was my dad's club, so this is a very special moment for me and my family.
"There is a huge challenge ahead of us, but it's one that my staff and I are ready for. We'll roll our sleeves up and we'll be giving it everything from the off to ensure supporters have a successful team that they can be proud of."
Lee Charnley, managing director at Newcastle, said: "Steve has a deep affection for Newcastle United and we are very pleased that a coach with his vast experience and connections to the club and city has joined us.
"Steve knows what this club means to supporters and to the region and he will put his heart and soul into leading our talented group of players with the full support of our staff."
Bruce and his staff were scheduled to travel to China on Wednesday, arriving after the 4-0 Premier League Asia Trophy defeat to Wolves in Nanjing, and will be in charge for the third-place play-off match against Manchester City or West Ham on Saturday.
'Local lad coming home'
Former Newcastle striker Shola Ameobi says Bruce will have a "big void" to fill following Rafa Benitez's departure.
Ameobi said: "He [Bruce] is obviously a very experienced manager. Local lad coming home. I think it's interesting with Rafa leaving - it's a big void.
"You need a big character to fill that void and I think Steve's got the experience to be able to handle what will be a tough job, following in the footsteps of Rafa Benitez and everything he's done over the past three years at Newcastle, but I think he will be up for the task.
"It's no surprise that this was his dream job. Something growing up as a boy you want to play for the club, you want to be a part of it and as a manager this would've been on Steve's radar the whole time. I think the fact that this opportunity has come at this time for him he feels it's the right step for him.
"Everyone at Newcastle will want him to do the best job. We are very passionate about local boys doing well in Newcastle and he's a local boy and I'm sure the fans will get behind him when he starts getting into the group."
In a 21-year coaching career, Bruce has taken charge of a further nine clubs, most notably Newcastle's north east rivals Sunderland.
Ameobi added: "There's local pride at stake here and ultimately Newcastle fans have that rivalry with Sunderland but I think what you've got to realise is Rafa is a high-calibre manager and if any club loses him, rightly the fans are going to be disappointed.
"We have to get behind whoever was appointed. Steve's obviously lucky enough to get the job and I think it's important that we back him now.
"He has been appointed a head coach which goes against everything that Steve has been in the past. He's been a manager, he's had full control, so it will be interesting to see that dynamic. But I certainly think he will have the full support of all the coaching team and all the team that he has around him.
"The success of the club, the fans are a huge part of that. You can see when we do all come together like we did under Rafa, we can do good things. I think that's what has to happen now. Steve is a local boy, he wanted this job. All we have to do now it's been announced, let's get behind him."
Fans react: 'We don't want him'
Newcastle fans in China to see to their side at the Premier League Asia Trophy spoke of their unhappiness at the appointment.
The panel on Sky Sports News show Good Morning Transfers felt the move was a "sensible" - if unsurprising - one.