Dempsey returns to the DCBL Stadium having previously served as first team coach for much of the curtailed 2020/21 season.
The 33-year-old leaves Ashton Town after two spells as a manager, leaving Town in eighth place in the North West Counties Division One North.
He will be joined by assistant manager Karl Bell, Chris Stammers and Tony Dunne, while physio Ron Cook, and kit man Craig Patterson will remain on board to comprise the rest of the backroom staff.
Dempsey’s first game in charge will be Tuesday night’s local derby at Prescot Cables.
“This is an opportunity I’m really grateful to receive,” said Dempsey.
“Firstly, I’d like to thank the chairman Ian Ross and the board of directors for putting their faith in me to lead this group of players and to progress the Club moving forward.
“I’ve worked at Widnes previously under Ste [Akrigg] and Kev [Towey] and I have a good understanding of the group of players and how we can push forward and improve on and off the pitch.
“I bring a backroom team with a wealth of experience and all three have a proven track record of winning trophies and working within a successful environment and we are looking forward to the opportunity to do the same at Widnes.
“I am massively excited to get going and be given the chance to test myself at a level where I will get the most out of my players week in and week out.
“I can’t wait to get started at Prescot on Tuesday night.”