The Bradford-born 49-year-old, who began his playing career at Valley Parade, had been out of management since leaving Lincoln in 2009.
He replaces Peter Taylor, who left the Bantams after one year in charge following Saturday's 3-2 home win over Stockport.
Jackson will be assisted by youth-team manager David Wetherall, while Bradford have placed assistant manager Wayne Jacobs and first-team coach Junior Lewis on gardening leave.
The club lie fifth from bottom in npower League Two.
Source: PA
Source: PA