The team announced the hiring of Donovan on Tuesday, less than two weeks after he mutually parted ways with the Thunder after five seasons. He replaces Jim Boylen, who was fired by the Bulls in 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 vice president of basketball operations Arturas Karnisovas said in a statement Tuesday.
"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."
Karnisovas aggressively pursued Donovan after the coach left the Thunder organization at the beginning of this month, according to ESPN. The Bulls executive tried to sell Donovan on the team's talented young roster and chance to lead one of the NBA's most decorated franchises.
Donovan posted a 243-157 record as head coach of the Thunder, including an 18-23 mark in the postseason. He initially signed a five-year deal with the Thunder in April 2015 after spending 19 years as the men's basketball coach at the University of Florida, where he won two national titles.
Donovan's contract with the Thunder expired after the 2019-20 campaign.
"I want to thank [owner] Jerry [Reinsdorf], [team president] Michael [Reinsdorf], Arturas and [general manager] Marc [Eversley] for the opportunity to coach the Chicago Bulls," Donovan said Tuesday.
"I also want to thank them for the time and effort they put into this hiring process. I'm excited to partner with Arturas as we work together on behalf of this historic franchise."
Donovan, 55, guided the Thunder to the playoffs in all five of his seasons. In his first year in Oklahoma City, he led the Thunder to the Western Conference finals.
The Thunder went 44-28 in the regular season before losing to the Houston Rockets in the first round of the NBA playoffs in Orlando, Fla.