Cooper had announced his intention to step down from the Hurricanes after the 2010 Super 14 season.
His decision to apply for the Taranaki job vacated by Adrian Kennedy came at the last minute, he told the Taranaki Daily News.
Taranaki chairman Peter Crawford said he was delighted to have secured Cooper on a two-year contract.
"He is extremely highly regarded throughout the rugby world and the expertise and strong values he will bring to our province will give us the best possible chance of success in the future."
Cooper said he had several options to consider for 2011 but it was the opportunity to be close to his family again which tipped the balance.
"Taranaki has always been home to me and I have been away from my family for the last nine years, which has been hard on them and on me."
He reportedly turned down bigger offers from overseas to return to the province.
