The 51-year-old spent six years at Millwall but is now embarking on "a new challenge" with the Molineux outfit as they look to tackle life in League One following relegation
Jackett recently resigned from his position at Millwall after a six-year spell that earned promotion to the Championship and an FA Cup semi-final appearance against Wigan in April.
Wolves dismissed former boss Dean Saunders earlier this month following the club's relegation to League One and Jackett will be tasked with arresting the Molineux outfit's slump, which has resulted in back-to-back relegations.
"I am both proud and delighted to have been appointed Head Coach at Wolves, and am really looking forward to the challenge ahead," Jackett told the club’s official website.
The former Wales international has experienced promotion out of League One with Millwall in the 2009-10 season and finished as high as ninth in the Championship during his three years in the second-tier.
Millwall chairman John Berylson expressed his disappointment at losing "one of the best” following Jackett's resignation from the club on May 7 - the same day that Saunders was axed by Wolves - but the former Swansea boss felt the time was right to leave.
"After almost six seasons I personally feel the time is right for a new challenge," Jackett told the club’s official website at the time. "And also for a new manager to come into Millwall with fresh ideas to take the club forward towards its long term goal of reaching the Premier League."