Castro, who had his first senior managerial role at Greek side Panetolikos in 2019 before returning to Portugal to take charge of Benfica's youth and reserve teams, managed Ligue 2 club Dunkerque for the past two campaigns.
Last season, Castro led Dunkerque to the Coupe de France semi-finals, where they took a 2-0 lead against Paris Saint-Germain before bowing out 4-2, and they also reached the promotion playoffs, where they lost out to Metz in the semi-final.
Nantes sacked Antoine Kombouare at the end of last season, a campaign in which the club battled relegation until the final day.