Baraclough, 46, takes over from Jim Magilton, who remains the Irish Football Association's elite performance director.
The new under-21 manager moves into the post after leaving his role as assistant to Oldham boss John Sheridan.
"I am looking forward to working with young players in Northern Ireland," said Baraclough.
"I will be aiming to help the team be successful in qualifying and also to help develop future senior internationals."
Baraclough had a 20-year playing career which saw him play for QPR, Notts County and Scunthorpe United.
He became Scunthorpe manager in 2010 before moving to Sligo Rovers two years later, where he guided the Irish club to the League of Ireland title plus FAI Cup and Setanta Cup triumphs.
After being appointed Motherwell manager, he kept the club in the Scottish Premier League and was then handed the Oldham assistant's role after departing from the SPL outfit.
Northern Ireland senior manager Michael O'Neill said Baraclough would be a "great addition to our international coaching team".
"We were looking for a candidate with good coaching and management experience and Ian certainly fits the bill given his previous roles as both a manager and assistant manager," said O'Neill.
Northern Ireland's Under-21s have never progressed to a European Championship Finals and finished last in their previous qualifying group after picking up only two points from 10 matches.
Baraclough's Under-21 side have have been drawn with Albania, Estonia, Iceland, Slovakia and Spain in their 2019 UEFA European Championship qualifying group.
The Northern Irish begin their campaign against Estonia in Tallinn on 8 June.

Council leader Jim Logue said he ordered the move after receiving an anonymous letter relating to the council's procurement processes.
He said police had been informed and the council's audit team would now carry out a detailed investigation.
The council said that if anything was found which substantiated the claims, it would be handed over to police.
Mr Logue said: "These allegations, which are detailed, concern some of the council's procurement processes. If true, they are extremely serious.
"I immediately instructed Paul Jukes, the chief executive, to launch an investigation.
"That investigation, led by the council's internal audit team, is already under way."
The council leader said that the internal audit team would be able to access all files held by any part of the council and all IT systems.
He added: "It is essential that the people of North Lanarkshire are able to have full confidence in the way the council conducts its business and I am determined that we are transparent at all times.
"Although these are currently unsubstantiated, anonymous allegations I believe that it is right to carry out a full investigation and share any evidence which comes to light with the police.
"As that investigation is now under way, it would be inappropriate for the council to comment further."

Gateshead-born Harrison has been linked with Hartlepool United, who parted company with Dave Jones after dropping into the League Two relegation zone.
Harrison says he is flattered but insists his focus is on Sunday's Welsh Cup final against Bala Town.
"I've said from day one that I'm a very ambitious person," Harrison said.
"I want to manage at the very best level I can.
"It's nice to be linked to these jobs. But at this point in time the Welsh Cup Final is the be all and end all for me.
"Once that's finished we'll be preparing for the Champions League and then whatever will be will be."
Saints have already secured the Welsh Premier League title and the Nathaniel MG League Cup, Saints and earlier this season broke Ajax's 44-year world record for the most consecutive wins with 27 straight victories.
Harrison's side will achieve a third successive Welsh treble if they beat Bala in Sunday's Welsh Cup final in Bangor.
Former Motherwell and Sligo Rovers boss Ian Baraclough has been appointed the new Northern Ireland Under-21 manager.
[NEXT_CONCEPT]
North Lanarkshire Council has launched an investigation "into serious allegations of corruption".
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New Saints boss Craig Harrison has said he has ambitions to manage at "the highest level."