Wilson, 44, takes over at the club with current caretaker manager Jimmy Gilligan as his assistant.
MK Dons chairman Pete Winkelman said: "This is a very important moment in the evolution of our football club, and I'm sure everyone will be genuinely excited that Danny has chosen to lead the club into our new home at Denbigh."
Tykes Mad is surprised he's joined the Dons after being linked with so many other vacancies recently. He will do well to keep them up this season.
It ends the speculation linking him with a return to the Reds.