Montgomery, who spent the last five seasons as the head coach at the University of Denver, will take over for the recently retired Ken Hitchcock.
"We are extremely happy to announce Jim as the head coach of the Dallas Stars," Stars general manager Jim Nill said. "He has achieved success at every level throughout his coaching career, establishing a unique culture around every team that he has led. He has created a standard of excellence by building trust with his players, while putting systems in place that allow his teams to compete for championships season after season."
Montgomery helped lead the Denver Pioneers to a 125-57-26 record over five seasons, including back-to-back trips to the Frozen Four in 2016 and 2017. Denver won the NCAA tournament last year.
The 48-year-old also spent six seasons in the NHL as a member of the St. Louis Blues, Montreal Canadiens, Philadelphia Flyers, San Jose Sharks and Stars. Over the course of 122 total appearances, the journeyman center racked up nine goals and 25 assists.
Montgomery will now head back to Dallas to try to lead the Stars to the postseason for the first time since 2016.
"He has seen the game evolve from his career as a player through his time behind the bench at the junior hockey and NCAA levels, and has been able to adapt his coaching style to ensure his team's success," owner Tom Gaglardi said. "The knowledge and experience he has gained from his diverse hockey background will aid our organization immensely moving forward."