The 42-year-old, who spent two years at Loftus Road, has also been in charge of Kidderminster Harriers, while was number two to Stephen Kenny with the Republic of Ireland national team as well.
Speaking to the Blues official website after being unveiled, Eustace said: “I am very proud to be here.
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“Obviously, I am a Birmingham lad and I know the potential of the club and how important it is to the fans.
“We have underachieved in the past few seasons and a club of this size, with the support that this club has, we need to be aiming higher.
"I can't wait to get going, meet the staff and get my ideas across to the players out on the pitches as soon as we can.
"The big picture is to get us as competitive as we can, to build a team that the fans are proud of, to play exciting football and win as many games as we can.
“The first thing we have to do is get this squad competitive and ready for that first game of the season against Luton.”
He replaces Bowyer, who had been in charge at St Andrew’s since March 2021 after joining from Charlton Athletic.
A club statement added: “In his first full campaign at the helm, Bowyer oversaw a 20th-placed finish including an opening day victory at Sheffield United and a 5-0 away win over Luton Town.
“Despite a promising start to the campaign, results fell below expectations as the season progressed and the board feel that a change in management is in the best interests of the football club at this pivotal stage.
“As a player and as a head coach, Lee’s commitment and dedication was never in question and we will always be thankful for his contribution both on the pitch and in the dugout.”