The 49-year-old Portuguese replaces Stuart Gray, who parted company with the Championship side on 11 June after 18 months in charge at Hillsborough.
Carvalhal has managed extensively in Portugal and also had a spell in charge of Turkish club Besiktas.
"I firmly believe that this appointment will take our team and our club to the next level," said Owls chairman Dejphon Chansiri, who took over in March.
BBC Radio Sheffield says Wednesday want Swindon Town boss Mark Cooper to assist Carvalhal, who will be formally unveiled on Thursday and takes over a side that finished 13th in the second tier last season.
Wednesday have not been in the top flight since being relegated in 1999-2000 and Chansiri has targeted promotion in the next two seasons.
"It is important for our supporters that they watch their team play attractive, aggressive and entertaining football," he added on the club's website.
"Carlos buys in completely to this philosophy and I am confident that his experience, knowledge and ability will herald the start of a successful new era for Sheffield Wednesday."
Cooper, 46, has been in charge of Swindon for the last two seasons and led them to the League One play-off final last season.
Joao Mario, Joao Cunha and Bruno Lage have already been named among Carvalhal's backroom staff.

At a UN oceans summit, delegates from China, Thailand, Indonesia and the Philippines said they would work to keep plastics out of the seas.
Some of the promises are not yet formalised and environmentalists say the measures proposed are not nearly urgent enough.
But UN officials praised the statement.
Meeting in New York, they said it was part of a clear international shift against ocean pollution.
Eric Solheim, the UN's environment director, told BBC News: "There are quite encouraging signs, with nations taking the ocean much more seriously. Of course, there is a very long way to go because the problems are huge."
It is estimated that 5-13 million tonnes of plastics flow into the world's oceans annually. Much of it is ingested by birds and fish â€“ and fragments of plastic have even been found in organisms at the bottom of the ocean.
A recent paper said much of the marine plastic often originates far from the sea â€“ especially in countries which have developed consumer economies faster than their ability to manage waste.
The  Helmholtz Centre in Leipzig, Germany, estimated that 75% of land-borne marine pollution comes from just 10 rivers, predominantly in Asia.
Reducing the plastic loads in these rivers by 50% would reduce global plastic inputs by 37%, it said.
Tom Dillon from the Pew Charitable Trusts, which campaign on oceans, urged China to move quickly.
He told BBC News: "For thousands of years the Maritime Silk Road was a pathway for export of Chinese culture and influence. Will the ocean be a vehicle for export of Chinese pollution, or a new culture of conservation and sustainability?"
A report to the UN conference from the Thailand government says most marine plastic debris is land-based, caused by inefficient waste management and poor handling of plastic wastes.
In Thailand, the total amount of garbage finding its way into the sea was estimated at 2.83 million tonnes in 2016 - of which 12% was plastic.
The Thai government says the nation has established a 20-year strategy to tackle the problem, including developing financial incentives for keeping plastic out of the sea and encouraging eco-packaging design and eco-friendly substitutes for plastics.
In Indonesia, the government is starting a mass education programme for schoolchildren, and in the Philippines new laws are being developed.
Part of the challenge is finding substitutes for plastics. An international prize for smarter materials and design for packaging was launched recently by the Ellen MacArthur Foundation.
Follow Roger on Twitter @rharrabin
Sheffield Wednesday have named Carlos Carvalhal as the club's new head coach.
[NEXT_CONCEPT]
Nations responsible for much of the world's ocean plastic pollution have promised to start cleaning up their act.