The former Manchester City and Leicester City midfielder takes over from caretaker boss Andy Ballard, who has held the reins at Marsh Lane since mid-October.
Oldfield has been employed in several coaching roles since departing Brackley Town in 2008, including assistant manager positions at Peterborough United, Burton Albion and Queens Park Rangers.
The Hoops are currently 12th in Vanarama National League South- nine points away from the play-off places.
In a Club statement, Oldfield said: “I am very pleased to be joining Oxford City and look forward to working with the players and staff at the club, both on and off the pitch.
The Club is looking to build on the strong foundations that are already in place, with continued progression on the pitch and further growth of the vital community links around the city.
“I know the passion of Oxford City supporters and very much hope to bring more success to achieve all of our collective ambitions”.
Oldfield will not have to wait very long for his match in charge as Oxford City host Chippenham Town tomorrow afternoon.