New general manager Reggie McKenzie decided earlier this week to hire Allen to replace the fired Hue Jackson as head coach. The two sides finalized the details Thursday. Allen will be formally introduced Monday.
Allen is Oakland's seventh head coach since 2003. The Raiders have gone nine straight seasons without a winning record or a playoff berth, just missing out on the AFC West title on tiebreakers with an 8-8 record last season
The 39-year-old Allen will be the first new Raiders coach to come from the defensive side of the ball since late owner Al Davis hired linebackers coach John Madden in 1969.
In his first season as coordinator in Denver, Allen helped the Broncos improve from allowing a league-worst 29.4 points and 390.8 yards per game to ranking 20th in yards (357.8) and 24th in points (24.4) this season on the way to an AFC West title.