The 55-year-old Funkel, who has coached Eintracht Frankfurt for the last five years, takes over with immediate effect and will be on the bench for Sunday's match against Bundesliga leaders Hamburg.
He will take over from caretaker coach Karsten Heine and with just three points from their first seven games of the season, Hertha are struggling for both confidence and form.
Hertha, who sacked Favre last Monday, will be the sixth Bundesliga team Funkel has coached after working previously with Duisburg, Hansa Rostock, Cologne and Frankfurt.
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