The Shrimpers, who sit one place and a point above the League One drop zone, have agreed a two-and-a-half-year deal with the former England international.
Powell spent six years of his playing career at Roots Hall, making 290 appearances.
The 48-year-old’s last job was as assistant manager to Steve McClaren at Derby. The 48-year-old also played for Derby, Charlton, West Ham, Watford and Leicester.
He started his managerial career at Charlton, winning the League One title in 2012, and joined Huddersfield in September 2014 but won just 15 of his 58 games in charge and was sacked just over a year later.
Rangers manager Steven Gerrard is weighing up a move for Liverpool full-back Jon Flanagan, reports claim.
Scottish champions Celtic are reportedly ready to offer full-back Calvin Miller a new deal before sending him out on loan.
Everton target Jack Wilshere has sparked a scramble for his signature after confirming he is leaving Arsenal this summer.
Tottenham's hopes of landing Wilfried Zaha have been hit by the news Crystal Palace have offered him a bumper new deal to stay.