The 68-year-old is currently without a club after leaving Guangzhou Evergrande in 2014.
In the last few days, he has been linked with a return to the club following his first successful spell that lasted two years.
During his three seasons with the Chinese giants, he won the league title three times, the Chinese Cup and the Asia Champions League.
Reports claimed he was close to signing a new deal with the club but Guangzhou have agreed that he can also sign a contract that will see him manage the national team.
Lippi will bring plenty of experience to the role at international level, having enjoyed two spells in charge of Italy and winning the World Cup in 2006 with the Azzurri.