The league announced Saturday morning that Budenholzer took home the award after polling all 30 of the coaches in the NBA.
This season, Milwaukee led the Eastern Conference with a 60-22 record, two games better than the Toronto Raptors.
"It's an incredible honor to be recognized by your peers, and that makes this award truly special," Budenholzer said in a statement.
"Thank you to my colleagues across the NBA, and most importantly thank you to our players and staff in Milwaukee. The players' and staffs' work this year has given our team and our fans a very special season."
It was the second time that Budenholzer took home the award, winning it as coach of the Atlanta Hawks in 2015.
Included in the running for the award were Brooklyn's Kenny Atkinson, Denver's Michael Malone, Indiana's Nate McMillan, San Antonio's Gregg Popovich, the Clippers' Doc Rivers, Utah's Quin Snyder and Portland's Terry Stotts.