Granato, 49, was an assistant coach with the Pittsburgh Penguins for the past five seasons (2009-14) and guided their defense (2.49 goals-against per game) and penalty killing (85.0 percent) to top-10 finishes in the NHL last season. Granato also was part of the coaching staff for the United States at the 2014 Sochi Olympics.
Granato had two stints as coach of the Colorado Avalanche (2002-04, 2008-09), and went 104-78-17-16, with two Stanley Cup Playoff appearances and one Northwest Division title. He was an assistant coach for the Avalanche for parts of four seasons (2002-03, 2005-08).
"He [Granato] has lots of appeal," Babcock recently told the Detroit Free Press. "He's a former head coach, he played in the NHL. I'm told he's fantastic. I checked around the League, everyone told me he did a great job. I know there were other teams trying to hire him.
"I think he's a real good fit for me. I was looking for a guy who is a good player guy, who can help the younger guys, and who can help me be a better coach."
Granato fills the void left by Bill Peters, who left Detroit to become coach of the Carolina Hurricanes on June 19.
The Red Wings also lost associate coach Tom Renney, who was named president and CEO of Hockey Canada.