Whatmore, who captained Victoria state and played seven tests for Australia, has coached Sri Lanka over the last 18 months and was involved in their World Cup triumph last March.
Fellow countrymen also involved in the English game include Dave Gilbert at Surrey, Dean Jones and Les Stillman at Derbyshire and David Boon, who joins Durham next season.
Lancashire have had trouble filling the post since David Lloyd left to take over as England coach and Graham Gooch and Dennis Lillee both turned down the job.
Although they won two of the one-day competitions this year, they ended the season fourth from last in the county championship.
Lancashire officials said they were delighted Whatmore had accepted the job.
``He has experience as a player and coach at the highest level and was very keen to join us from our initial approach,'' said Lancashire chief executive John Bower.