Nolan, who has served as interim head coach since mid-November, signed a three-year extension with the team.
"I said back in November that it was a dream to be able to come back and coach the Sabres and that's still true today," Nolan said. "Hockey is my life and Buffalo is a special place for hockey. I'm excited by the challenge facing our team and our organization and I'm truly thankful to have this opportunity."
The Sabres certainly have some challenges on the horizon, as they currently sit in last place with a 20-45-9 record after a franchise-worst 4-15-1 start to the season under former head coach Ron Rolston.
Buffalo has been scarcely better under Nolan -- 1-10-1 in its last 12 -- but general manager Tim Murray thinks he's got the right guy.
"We are very happy to get this deal done and have Ted Nolan as our permanent head coach going forward," Murray said. "Teddy has proven time and again that he is an exceptional leader, motivator and teacher. He is exactly what we need in a head coach for our hockey team and we're confident in his ability to guide our players and turn this team around."
Nolan led the Sabres for two seasons in the mid-1990s, compiling a 73-72-19 record. He has also served as head coach of the New York Islanders.