The Welshman has taken the decision to leave the Keepmoat Stadium for the Black Country and attempt to stabilise the club's rapidly declining fortunes in the Championship this year
The Championship outfit had earmarked Saunders as their preferred replacement for Stale Solbakken, who was sacked late on Saturday night following a poor run of form that has seen the club drop to 18th in the Championship table, before being knocked out of the FA Cup by non-league Luton Town.
After a day of negotiations, Welshman Saunders, who has taken Doncaster to joint-top of League 1 following their relegation from the Championship last season, has accepted the opportunity to take charge at Molineux.
“I have just come off the phone with Wolverhampton Wanderers’ chief executive Jez Moxey, at 8.50pm Sunday evening, and can confirm that Dean Saunders has agreed to take over as manager at Molineux," Doncaster Rovers' chief executive Gavin Baldwin told the club's official website.
“We have agreed a good deal for Doncaster Rovers. Work has already started on trying to find a replacement for Dean and continue our push for promotion back to the Championship.
“I have spoken with Dean to thank him for the fantastic job he has done here at Doncaster and wish him well for the future.”
Saunders, who scored 22 times in 75 appearances for his country and also played for Midlands trio Derby County, Aston Villa and Nottingham Forest, will now begin to put his plans together ahead of Wolves' Friday night clash at home to fellow recently-relegated Blackburn Rovers.
The 48-year-old will become Wolves' fourth manager in just over 12 months, following on from Mick McCarthy, Terry Connor and Solbakken.