Former Canterbury and Crusaders centre Casey Laulala will join Munster from the Cardiff Blues next season.
Penney's ability to develop young talent is renowned but all eyes will be on how he manages the egos of senior internationals.
Having guided Canterbury to four consecutive national provincial titles, there is a sense of excitement at his overseas opportunity, but also sadness at leaving a province dear to his heart.
"I played here for 10 years as a player and I have coached here for nine. I've been blessed to have that opportunity.''
There will also be a satisfaction that his talents as a coach have finally been recognised.
In recent years he has applied for and failed to get jobs at the Crusaders, Hurricanes and Chiefs, with the powers that be preferring Todd Blackadder, Mark Hammett and Dave Rennie respectively.
"The ITM Cup unfortunately has got to the stage were your ability to influence [players] has become less and less.
"As much as I love coaching in the New Zealand environment, this opportunity became too powerful to resist. If you look at European clubs that you would want to align with, this is certainly one of them, it's an awesome opportunity. European games, they sell out, you don't have to put the tickets on the market.''
Penney will join a growing community of New Zealand coaches in Ireland. Former Auckland coach Mark Anscombe will take charge of Ulster next season. Former Bay of Plenty coach Joe Schmidt, as well as Jono Gibbes and Greg Feek, former Chiefs and Crusaders players respectively, are at Leinster.
Penney's departure will follow that of Canterbury Rugby Union academy manager Matt Sexton. The former Crusaders hooker will join South Africa franchise Southern Kings as they push for inclusion into the Super Rugby competition and the pair have been instrumental in developing talent at Canterbury.
Penney, however, said the replacement process would be an easy one for Canterbury. He nominated his current assistant Tabai Matson for his job.
Canterbury Rugby Football Union CEO Hamish Riach said: ``Rob has been a great servant for Canterbury rugby. We are very sorry to lose a talented coach, but this is a fantastic opportunity for him and we wish him all the best.''
Anthony Foley, also in the running for the top job, will continue as Munster's forwards coach. Chief executive Garrett Fitzgerald said: "We conducted a thorough search to find a replacement for Tony McGahan and were delighted with the calibre of the candidates. Rob Penney's record speaks for itself and we look forward to welcoming him to Munster.''
Penney's wife Erin and three sons will join him in Ireland, and they will probably be based in Limerick. Munster also play home matches at Cork.
