File Photo: Wolfsburg s new Coach Niko Kovac . AFP
It will be the Croatian's third job in the German top flight, having also been in charge of Eintracht Frankfurt from 2016-18.
Kovac left Ligue 1 side Monaco at the end of last year.
"I'm a child of the Bundesliga. I'm very keen and motivated to start another successful chapter with the Wolves," Kovac said in a statement.
Kovac also led Croatia to the 2014 World Cup in Brazil, where they were eliminated in the group stage.
He won the German league and cup double with Bayern in 2019 after beating the Bavarian giants to win the German Cup with Frankfurt the previous season.
But his Bayern reign ended in November 2019 after an embarrassing 5-1 loss to Eintracht.
As a player, Kovac made 240 appearances in the Bundesliga during spells at Hertha Berlin, Bayern, Bayer Leverkusen and Hamburg.
Kovac has signed a contract until 2025.
"The team has enormous potential and the conditions are there for optimal and successful work," the 50-year-old added.
He replaces Florian Kohfeldt, who was sacked earlier this month after Wolfsburg finished 12th in the Bundesliga.
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