The 54-year-old Welshman will formally start work at Rangers on 7 July as he ends a nine-year stint as academy director of Manchester City.
Recruiting a director of football was a key part of the new football backroom structure the Rangers board set out to implement following the departure of Mark Warburton as manager in February.
They missed out on their initial target, former Falkirk head of development Ross Wilson, who turned down their approach in order to remain in his current role at Southampton. But Rangers managing director Stewart Robertson is enthused by their success in persuading Allen to head north and lend his support and expertise to manager Pedro Caixinha.
“We are delighted Mark has agreed to move to Glasgow and become our new director of football,” said Robertson.
“He is a man of vision who has achieved great success with Manchester City’s academy. He has excellent contacts in football but also the business world and he will be a great asset to Rangers.
“We said we would not rush into an appointment as we wanted the right candidate and we feel Mark is the best man for the job. We look forward to working with him closely in the years ahead in what will be an important role at the club.”
Allen joined Manchester City in 2008, one of the first appointments of the Sheikh Mansour era at the club, and oversaw the development and strategy of all age groups from under-9s up to the elite youth squad.
Born in Cardiff, Allen had a brief career as a youth player at Swindon Town before moving to the United States where he undertook a football scholarship, along with degrees in business and accounting.
On his return to the UK at the age of 24, he combined semi-professional playing stints at Welsh clubs Port Talbot and Cwmbran Town with a highly successful career in the media industry with MTV and Deluxe Digital.
Allen, who has a Uefa A licence coaching qualification, was highly regarded at City, although their academy was stung by controversy last month when the Premier League fined them £300,000 and banned them from signing certain youth players for two years after they were found guilty of contacting family members of players who were already registered with other clubs.
“I loved every minute of my time with Manchester City, they are a club with fantastic people and fantastic supporters but the time was right for me to look for a fresh challenge and I am joining one of the world’s truly great football clubs,” said Allen. “Steeped in history and tradition, I am honoured to join Rangers and work with the board of directors, Pedro Caixinha, his management team and the staff at the club.”
Rangers, meanwhile, have confirmed the dates of their Europa League first qualifying round tie against Progres Niederkorn of Luxembourg. The first leg will take place at Ibrox next Thursday, 29 June, with the return fixture on Tuesday, 4 July.
The venue for Luxembourg leg has been thrown into confusion after it emerged the Josy Barthel national stadium, which was due to host the tie, is to be renovated next week.