He will replace Oliver Glasner who has taken over Bundesliga rivals Eintracht Frankfurt.
Van Bommel, 44, coached PSV Eindhoven for a brief tenure in 2019 and was previously assistant for Saudi Arabia and Australia alongside his father-in-law Bert van Marwijk.
“I’m looking forward to working for Wolfsburg and I’m excited about my new environment, the people and the job that awaits me,” Van Bommel told Wolfsburg’s website.
In his playing days as a midfield enforcer Van Bommel was Bayern Munich’s first non-German captain, won the Champions League at Barcelona and a league title with AC Milan.
He was a major figure in the Netherlands national side that almost won the 2010 World Cup, going down 1-0 to Spain in the final.