O'Shea, who won 118 caps for the Republic, had been an assistant coach under previous manager Stephen Kenny and with the under-21 side.
Kenny left the role in November after failing to qualify for Euro 2024.
The Football Association of Ireland (FAI) have also confirmed Kenny's permanent replacement will be appointed in "early April".
O'Shea will lead the team for the Republic's friendlies against Belgium and Switzerland in March.
The former Sunderland defender also had coaching spells with Reading and Stoke City before joining former Manchester United team-mate Wayne Rooney's backroom team at Birmingham City.
The 42-year-old left the Championship club in January following Rooney's dismissal as head coach.
O'Shea, who retired from playing in 2019, said it will be an "incredible honour" to lead the Republic in next month's friendlies.
"As everyone will know, I've always had immense pride representing my country, whether that be during my playing career or very recently, as part of the coaching staff for the men's senior team and the Under-21s," said O'Shea, who won five Premier League titles and a Champions League during his 12-year spell at Old Trafford.
It's great that Paddy has agreed to come on board for the two matches and work will begin straight away to prepare for two top-quality fixtures against great opposition in Belgium and Switzerland, in front of our fantastic home support.
"I've got great belief in this group of players to win football matches and looking forward to some positive results."
While confirming O'Shea's interim appointment, Canham said he was "pleased" that the process to find Kenny's replacement was "nearing completion".
"John has developed a strong level of excellent coaching experience across both domestic and international football and has recently been involved at both U21 and senior level with Ireland alongside his considerable achievements as an international player and in his club career," said Canham.
"John knows this group of players extremely well and with the support and expertise of Paddy, we believe this team are the right choice for the interim period."
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