He replaces Jim Boylen, who was fired this past August.
"We are very pleased to welcome Billy and his family to the Chicago Bulls. The success that he has sustained over the course of his coaching career puts him on a different level," Bulls executive VP of basketball operations Arturas Karnisovas said in a statement. "We feel his ability to help his players reach their potential, both individually and collectively, will mesh well with our roster. Whether as a player or as a coach, he has won everywhere his career has taken him, and we hope that will continue here in Chicago."
The 55-year-old Donovan recently agreed to part ways with the Thunder following Oklahoma City's loss to the Houston Rockets in the first round of the Western Conference playoffs. His contract with the Thunder had expired following the loss.
According to ESPN's Adrian Wojnarowski, Karnisovas aggressively pursued Donovan in the aftermath of Donovan's leaving the Thunder.
Donovan first joined OKC ahead of the 2015–16 season after a lengthy stint at the University of Florida.
In each of his five seasons with OKC, the Thunder had a winning record and had a winning percentage of more than .570. He won more than 60% of games as the team's head coach. And this year, he was the cowinner of the National Basketball Coach's Association's Coach of the Year award.
By joining the Bulls, he takes over an organization looking for its first playoff berth since 2016–17. Chicago went 22–43 this year and, since Boylen took over the team in December 2018, the club went 39–84 under his watch.
The decision to hire Donovan is the first head-coaching hire under the leadership of Karnisovas.
Donovan becomes the club's third in the last seven seasons.