The job was left vacant when Nasser Al Johar stepped down earlier this week, and Peseiro will now fill the void.
The Portuguese coach has plenty of experience coaching around the world and it is thought he will arrive in the country next Friday.
The 48-year-old has coached Sporting, Panathinaikos, Rapid Bucharest in the past and was also assistant to Carlos Quieroz in his short spell at Real Madrid.
His time with the Spanish club might not have been too successful but he will be hoping for better things with Saudi Arabia.
Certainly he has a tough task on his hands to qualify for the 2010 World Cup, with Al Johar leaving after their recent loss to North Korea.
That defeat left them second from bottom in the group with four points, and they trail leaders South Korea by another four points.
The first game that Peseiro will take charge of in the group will be the clash against Iran in late March which, with their opponents just one place above them, will be key.