The boss helped oversee a vital 1-0 win over Brechin City on Saturday, and his return to Ochilview has been extended.
He replaces Colin McMenamin who was sacked last Tuesday.
Ochilview chairman Iain McMenemy said: “We are grateful to Davie for stepping in to manage the team on a caretaker basis whilst we undertook a process to identify and appoint a new permanent manager.
“He signalled his intention to be considered for the role, but the Board felt that it was appropriate to continue to speak with a shortlist of other candidates as well to ensure we identified the right person for the job.
“Whilst there were a number of good candidates considered, Davie is the right person for this role at Stenhousemuir FC. His affinity for the club, his enthusiasm for the challenge, and the approach that he wanted to take gave us the encouragement we needed and we were delighted to offer him the job, which he has accepted.
“The players have already responded positively to Davie’s approach and he has been well supported by the senior squad members during his caretaker period. Davie has an excellent track record in management and he is a UEFA Pro Licence Coach which is the highest level of accreditation you can achieve. The ability to coach to that level, as well as manage, is rare, and we are delighted to now have this in the club.
“I know that supporters will welcome Davie back as we all look to push the club forward. We have a number of important games coming up and we’re excited about the future.”
Irons has been in charge at Ochilview before having replaced John Coughlin in 2010.
After saving the club from relegation flanked by Graeme Robertson and Kevin McGoldrick, Irons took the Warriors to the brink of the play-offs in the season that followed.
He resigned from the post in summer 2012 with job commitments in the police but has been welcomed back to Gladstone Road.