National broadcaster NRK reported that the 53-year-old has signed a one-year contract.
Andersen's family confirmed the surprising choice, saying that the he has already been in North Korea for two weeks.
“It seems strange, but in North Korea sport is political. Just as it is in other countries. It means a lot for them to win and make a good showing within the international arena,” Geir Helgesen, head of the Nordic Institute of Asian Studies (NIAS) in Copenhagen, told NTB.
“They actually played pretty good football before. It has been up and down, but they have shown they are capable,” he added.
Helgesen said that picking Andersen is a sign that North Korea is “hoping to improve its image in the world by asking a foreigner to help with football”.
According to Anderson's family, North Korea wanted a German coach. The final choice fell on the Fredikstad-born Andersen, who became a German citizen in 1993.
The expectation is that he will build up the national team for the next World Cup.
Andersen's playing career includes stints with Fredrikstad and Vålerenga in Norway as well as a number of German and other foreign clubs.
He has headed several clubs as coach, but had a long break before taking over Austria Salzburg in January 2015, where he remained until December 2016.
Andersen's appeared in 27 matches for Norway's national team, scoring five goals.