Crainey was formerly the club's U23s boss until Simon Grayson was sacked just under a month ago where he then stepped up to be caretaker head coach until a permanent appointment was made.
He has had six games in charge in all competitions, five in League One and one in the Papa Johns Trophy.
Aside from a heavy defeat to Accrignton Stanley, and a narrow defeat in the cup, results have been positive for Crainey, winning two and drawing two.
He has helped the Cod Army climb out of the relegation zone and has got them keeping clean sheets, with three in as many games of late.
Barry Nicholson will officially be Crainey's assistant.
On the appointment, Fleetwood Chairman Andy Pilley said: “We’ve been hugely impressed with the way Stephen has managed to get the best out of a squad and the way he’s stepped up to manage the side through what has been a difficult spell with injuries.
“In the past month we’ve seen real leadership qualities in the way he’s taken charge of the first team, in the end it was an easy decision to appoint him until the end of the season at least.
"Stephen has worked hard to get himself into this position with the club, and it’s a promotion we feel is richly deserved.
“He’s played a huge part in the development of the team’s young star players, and we are delighted to name him as our new manager.”
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