Mackay was presented at a Hampden press conference as the successor to Brian McClair, who quit in the summer after a little over a year in the post.
The former Wigan and Cardiff manager will be in charge of overseeing the SFA’s attempts to produce elite young players.
In an SFA statement, Mackay said: “I am immensely proud and privileged to become performance director and I am acutely aware of the importance of this role in achieving future success for our talented young players.
“As someone who was fortunate enough to develop as a young player at Queen’s Park and realise my dream of playing for my country at the national stadium, this feels like coming home.
“I can’t wait to work in partnership with our clubs and my colleagues at the Scottish FA to help improve future generations of Scotland players.”
SFA chief executive Stewart Regan added: “From the start of the recruitment process, Malky was an outstanding candidate and by the end of that thorough process he was the outstanding candidate.
“His experiences as a player and a manager are complemented by his strategic outlook and commitment to implement many of the exciting proposals the performance working group have discussed in recent months.
“Malky will spend the initial weeks and months immersing himself in these recommendations and speaking to all relevant groups to provide a future framework that is conducive to meeting our shared objective: to provide a better standard of player for the benefit of our clubs and, ultimately, our national teams.”