The Dutch champions confirmed the news on their official website, www.psv.nl, following a press conference at the Philips Stadion on Wednesday evening.

The duo will succeed Quique Sanchez Flores at the Mestalla after the former coach's dismissal early on Monday morning.

Koeman has agreed a two-and-a-half-year contract which will keep him at Valencia until June 2010.

PSV director Jan Reker was sorry to see Koeman go but knew the Eindhoven club could not stand in the way of the former Holland international realising his dream of coaching in Spain.

"It's hard to explain," Reker told the press conference. "We are very satisfied with each other, we have a good relationship and PSV is doing very well sporting-wise.

"But then Valencia called us about Ronald Koeman. Our question was: can't you wait until next year? Ronald always said that his dream was to be coach of a top club in Spain. We respect that now.

"This is a dream club for him and they didn't want to wait. I was a coach myself and when you have a dream, you must take it when it comes.

"It's a pity for PSV indeed - but the ultimate challenge for Ronald. Valencia is of course a very big club."

Valencia suffered a second humiliating result in the space of four days as they slipped to an embarrassing 5-1 defeat at home to Spanish champions Real Madrid on Wednesday.

On this evidence, Koeman will have a lot of work to do.

Goals from Raul, Ruud van Nistelrooy (two), Sergio Ramos and Robinho gave Real a comfortable win, with Miguel Angel Angulo's volley the only reply from the hosts, who also saw Raul Albiol dismissed late on.

A devastating first-half display secured three points for Villarreal who remained second with a 3-0 win against bottom-of-the-table Levante.

Guillermo Franco, Giuseppe Rossi and Pascal Cygan put Villarreal in total control against a Levante side who have now taken just one point from a possible 30 and find themselves adrift at the foot of the table.

Sevilla's recent recovery came to an end with a 2-1 defeat at Atletico Madrid.

Maniche put the home side in front before Luis Fabiano equalised but Sergio Aguero got what proved to be the winner three minutes later.

Deportivo La Coruna's poor start to the season continued as they were held to a 1-1 draw by 10-man Real Mallorca at the Riazor.

Miguel Angel Lotina's side, who are now without a win in their last three games, fell behind early on to Daniel Guiza's goal.

The game swung in their favour when Mallorca goalkeeper Miguel Moya was sent off for a professional foul six minutes before half-time and Andres Guardado equalised from the resulting penalty.

However, they could not find a crucial second goal and will have felt aggrieved at having two goals disallowed for offside.

A Diego Milito penalty 11 minutes from time gave Zaragoza three valuable points in a 1-0 win in Almeria's Estadio Mediterraneo.

Struggling Getafe beat 10-man Athletic Bilbao 2-0 thanks to goals from Javi Casquero and Ikechukwu Uche.

Fernando Amorebieta saw red for the visitors in the second half.

Osasuna recorded their first away win of the season against Real Betis.

Cesar Cruchaga put them in front in the first half and Dady and Carlos Vela added two more goals in the second half to inflict a first defeat in four games on Hector Cuper's side.

Things got worse for the hosts when Abella Damia saw red in the closing minutes.

Racing Santander goalkeeper Antonio Tono made a string of fine saves to earn his side a point in a bad-tempered goalless stalemate at Recreativo Huelva.

Barcelona visit Real Valladolid on Thursday while Espanyol host Real Murcia.