Mauger, who played 46 times for the All Blacks from 2001-07, was appointed as an assistant coach of the 2015 Super Rugby champions earlier this year after he was sacked by the Leicester Tigers.
He replaces Tony Brown, who had only taken the job for the 2017 season as he had already accepted a role with former Highlanders coach Jamie Joseph who now mentors the Japan national side.
Former Hurricanes head coach Mark Hammett, who guided the Sunwolves in their inaugural Super Rugby season in 2016, remains with the team as an assistant coach.
Hammett's fellow assistants Clarke Dermody and Jon Preston also remain with the franchise, who are in the process of recruiting a defence coach after Scott McLeod joined the All Blacks.
"Having already contracted Mark and Aaron for next year, we started this head coach recruitment process with two very good candidates already in the fold," Highlanders chief executive Roger Clark said in a statement.
"Both have experience at head coach level and proven leadership skills.
"We could see that both are going to have significant input into the direction of the team over the next few years, and Aaron's appointment as head coach reflects our belief that he is best placed to lead the team's development at this stage."
The Highlanders were knocked out in the quarter-finals by the Canterbury Crusaders, who face South Africa's Lions in the final in Johannesburg on Saturday.
"The Highlanders have a solid foundation of good core values and a tight knit culture," Mauger said.
"Its a credit to all those who have worked hard to establish an environment that allows people to express themselves and thrive as individuals."