York announced the move on Twitter and so did the team on its Twitter account.
"After a thorough search, Trent & I are thrilled to announce Chip Kelly as the new #HeadCoach of the 49ers," York wrote, referring to general manager Trent Baalke.
Kelly won't be introduced in a news conference until next week based on schedules.
The former Eagles coach will replace fired coach Jim Tomsula. Kelly emerged as the favorite among several experienced candidates that included former Raiders, Broncos and Redskins coach Mike Shanahan, ex-Giants coach Tom Coughlin and former Raiders coach Hue Jackson, who was hired Wednesday to coach the Cleveland Browns.
"I think this is a really, really bold move by the 49ers," said ABC7 News Sports Director Larry Beil. "It's either going to work and be fantastic, or a complete disaster because Chip Kelly is kind of a polarizing guy. It sends a lot of messages and the first one is that owner Jed York is taking back his team and telling Trent Baalke, 'I'm running this,' because Chip Kelly's football philosophies are totally the exact opposite of what Trent Baalke would like in running style offense of controlling the ball."
He went onto say, "Chip is a brilliant offensive football mind. But the question is - if you could not get along with Jim Harbaugh, how are you going to get along with Chip Kelly? Because neither one of them will suffer any fools. Things are going to be different for the 49ers; a totally different offense. And the one thing you have to wonder is if this will bring Colin Kaepernick back into the fold as the potential 49ers quarterback."
"I had an interesting conversation a few weeks ago with a number of the Niners' front office who I happened to run into at a luncheon who asked, 'You think Kap has anything left?' And I said, 'You know what, I'd love to see him running Chip Kelly's offense in Philadelphia.' This was before Chip was fired by the Eagles. It's interesting that it's come around and now Chip Kelly has the potential to coach Colin Kaepernick for the Red and Gold."
If #49ers mgmt couldn't get along with Harbaugh, how will they get along with Chip Kelly?— Larry Beil (@LarryBeilABC7) January 14, 2016
Kelly had a disappointing season with the Eagles. The 52-year-old Kelly was fired by Philadelphia after Week 16 with one game left in his third season as coach. The former University of Oregon coach was 6-9 in 2015 following two 10-6 seasons, prompting Eagles CEO Jeffrey Lurie to make a change.
"I think the Niners have to hope that he's learned his lesson with his three seasons with Philly," said Beil. "He had two 10 winning campaigns and then this last season was a disaster. There was basically a mutiny amongst the players. Now, he had total control of the roster. And he basically traded away or got rid of anyone who had any skill. So the players were furious with Chip. The ownership was furious. And it just disintegrated instantly."
Beil doesn't believe Kelly will have that kind of power or control over the Niners' football roster.
Is this 1st sign of Jed telling Baalke: I'M IN CHARGE HERE. Can't imagine Baalke being happy about adapting roster to fit Chip Kelly #49ers— Larry Beil (@LarryBeilABC7) January 14, 2016
"I would hope that he's learned that he's gotta get along better with his employees; that this is a different situation and he's gotta have everyone onboard with his style and philosophy," he said. "He has a totally different approach than anybody else in the NFL. He ran it successfully at Oregon, it was wildly successful there. But he has to know that the players have to be onboard with him. It's not where he's a dictator and everyone else is just listening and following orders. If he can adapt, then I think this has a chance to be spectacularly successful. But Chip Kelly is a guy who rubs people the wrong way. If he can change and implement his system and the Niners grab to it, and Kap comes back and is able to flourish, this could be very exciting news for the San Francisco 49ers."
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The Associated Press contributed to this report.