The former Netherlands international succeeds Oliver Glasner who has left the Volkswagen Arena to take over at Eintracht Frankfurt.
Van Bommel previously managed PSV Eindhoven in his homeland but was sacked after 18 months.
The 44-year-old played in Germany for Bayern Munich, winning two Bundesliga titles with the Bavarians.
Wolfsburg finished fourth in the Bundesliga last season and will play in the UEFA Champions League next term.
"We have dealt intensively with Mark van Bommel and the personal talks have confirmed our impression that he fits perfectly with our philosophy. He is an internationally recognized football professional and knows what to expect in the Bundesliga," said Wolfsburg chief Jörg Schmadtke.
"He also has enormous ambition, which has already distinguished him in his long playing career. Mark van Bommel is our desired solution and we are convinced that together with him and his coaching team we can continue VfL's successful path."
Van Bommel, who won the Champions League with Barcelona in 2006, added: "I am very much looking forward to working at VfL Wolfsburg and am excited about my new environment, the people and the task that awaits me. The ideas and perceptions of those responsible are identical to mine and I can identify very well with the path the club has taken.
"To be allowed to work as a coach in the Bundesliga, where I played for so long, is a great honor and challenge for me, which I will approach with great joy and commitment together with everyone involved."
