Skiles, 44, is a former Bucks player who has an overall record of 281-251 in eight seasons as an NBA head coach with Phoenix and Chicago. He was fired as coach of the Bulls during this past season after the team started 9-16.
The previous season, Skiles directed the Bulls to a 49-win season and a first-round sweep of Miami in the playoffs.
He replaces Larry Krystkowiak, who was fired last week after Milwaukee finished this past season with a 26-56 record.
Skiles got his first head coaching job in Phoenix in 1999, when he was promoted after Danny Ainge resigned. He has coached teams to the post-season five times.