Rush, who started his career with Chester City, will be formally announced at this afternoon's game against Darlington.
Rush said: "Chester City has always been close to my heart. They gave me a start as a player and now my management career is starting with them.
"I have learned a lot in the last few years about coaching and I learned so much in my time on the coaching side at Liverpool, particularly from Gerard Houllier.
"I have been offered four or five managerial jobs in the past few years, but now I think is the right time to take a chance. This is the start of a new era.
"This is an opportunity I couldn't miss. Chester have an excellent chairman in Stephen Vaughan who is extremely loyal and with his assistance I am sure we will make progress."
