Flower will continue as England Team Director and will remain in charge of the Test team but will take a back seat in limited-overs cricket after five years at the helm.
Giles, an England selector since 2008, will take charge of the side for the first time on the tour of India and New Zealand in January and February.
"England cricket has enjoyed considerable success over the past five years," ECB Managing Director Hugh Morris said in a statement.
"In order to build on that success we know that we need to look for ways to evolve and it has become clear that the Team Director role needs to change if we are to ensure we are utilising the role as effectively as possible.
"Bringing in a Head Coach for the ODI and T20 formats allows the Team Director more time to plan for forthcoming series and tournaments and also have a more realistic and sustainable work life balance."
Flower, 44, said part of the reason for the change was to spend more time with his family, having been present at virtually every England Test and one-day match since taking the role.
He is currently in India where England are level with their hosts at 1-1 after two matches of a four-Test series.
"I'm very excited by these changes and very much looking forward to working with Ashley Giles as we look to build on the success England cricket has had in the last few years," Flower said in a statement.
"The changes in my role will provide me with new challenges and the time to allow me to focus on areas that are important if England cricket is to continually improve.
"The change in role will also allow me to thoroughly plan and prepare for each of our international series whilst spending the right amount of time at home with my young family."
Giles, a member of the 2005 Ashes-winning side, said: "I am delighted to have been appointed England ODI and T20 head coach and to be given an opportunity to coach at international level.
"I have worked closely with Andy in recent years as a selector and am looking forward to continuing to work together and to build on the progress that has been made."
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