Grosso was dismissed after three successive defeats left Fiorentina bottom of the league standings, with the team scoring only one goal while conceding nine.
The appointment marks a swift return for Vanoli, who previously rescued the club from relegation trouble last season after replacing Stefano Pioli in November following a winless 10-game start.
He eventually guided them clear of the drop zone to a 15th-place finish while also steering the club to the Conference League quarter-finals, where they were knocked out by eventual winners Crystal Palace.
"ACF Fiorentina announces that Coach Paolo Vanoli has been appointed as the new technical director of the Viola first team," the club said in a statement.
"A huge thank you goes to the coach for his enthusiastic acceptance of returning to lead the first team."
Vanoli will get his first chance to turn things around on Friday when Fiorentina travel to face promoted Venezia, who are also winless after three games with no points.