Ternent has quit his role as assistant coach at Derby County to take over the Yorkshire side, with former Town striker Ronnie Jepson becoming his assistant.
Davy said: "Stan is very experienced and his pedigree at this level speaks for itself.
"We were determined to appoint someone with a successful record in the third tier of English football, and his promotions to the second tier with Bury and Burnley meant that he stood head and shoulders above the other applicants.
"As well as having been there and done it, he has all the necessary qualifications and credentials to take Town to the next level.
"Our ultimate aim next season is promotion to the Championship and Stan has all the necessary traits."