Chaney replaces Tyson Helton, who left shortly after the regular season to become Western Kentucky's head coach. Chaney received a three-year contract worth a total of $4.8 million.
"Jim couldn't be a better fit for our program at the University of Tennessee," Tennessee coach Jeremy Pruitt said Wednesday in a release announcing the hire.
The hire was first reported by 247Sports.
Chaney was Tennessee's offensive coordinator from 2009-12 on the staffs of Lane Kiffin and Derek Dooley. Tennessee's 2012 team averaged 475.9 yards - its second-highest total in program history.
Chaney also served as interim head coach for a victory over Kentucky in the 2012 season finale after Dooley was fired.
He now must try to rejuvenate a Tennessee offense that has ranked last in the Southeastern Conference in yards per game each of the last two seasons.
Chaney was Georgia's offensive coordinator from 2016-18 and made $950,000 this season. He coached quarterbacks from 2016-17 and instructed tight ends this season.
Georgia averaged 238.8 yards rushing per game and 5.9 yards per carry this year to lead the SEC in both categories for a second straight season. Tennessee ranked last in the SEC in both categories this year, averaging 129.1 yards rushing per game and 3.7 yards per carry.
"What most impresses me about Jim is his knowledge of the game and also the way he has adapted his offenses to his players' strengths," Pruitt said. "He's had years where he has guided one of the nation's top passing offenses and years where his offenses have been near the top in rushing. He could coach every position on offense and is a true teacher of the game.
"Jim has proven to be a great mentor for young men, and I'm excited to have him here at Tennessee."
Chaney's contract will pay him $1.5 million in the 2019 season, $1.6 million in 2020 and $1.7 million in 2017, making him one of college football's highest-paid coordinators. The highest salary for any offensive coordinator in 2018 was Michigan's Pep Hamilton at $1.45 million, according to USA Today's coaching salary database.
That database showed eight defensive coordinators made at least $1.5 million this season.
Helton's contract at Tennessee had paid him just over $1.2 million.
Georgia ranked second in the SEC in points per game (37.9) and fifth in yards per game (464.9) this season. Tennessee was 13th out of 14 SEC teams in scoring (22.8) and last in yards per game (325.5).
Chaney also has been an offensive coordinator at Cal State Fullerton (1988-92), Purdue (1997-2005), Arkansas (2013-14) and Pittsburgh (2015). He was in the NFL as a St. Louis Rams assistant from 2006-08.