Piketty, 44, will work on research with postgraduate students on a part-time basis and the LSE said on Friday that it was planning for him to come over for four days next year.
The economist's best-selling and highly controversial book, "Capital in the Twenty-First Century", sparked a political debate about the widening gap between rich and poor.
"I am thrilled by my appointment to work in LSE's new International Inequalities Institute," said Piketty, who is a former student at the university.
"Rising inequalities is one of the great challenges of our time, which we desperately need to address.
"We have a unique opportunity at LSE to create a truly dynamic and exciting inter-disciplinary centre which will make a real difference to our understanding of the causes and consequences of inequality," he said.
Mike Savage, professor of sociology at the LSE, said that Piketty "has revolutionised our understanding of inequality through demonstrating how fundamental historical shifts towards escalating capital accumulation disproportionately enhance those who are already wealthy".