The ex-Manchester United and England superstar, who played for the club towards the end of his career, left his role as Derby County boss earlier this summer after their relegation to League One.
Despite the Rams receiving a 21-point deduction due to financial misconduct, Rooney's side still had the chance to avoid the drop with just a few games left of the Championship season.
He was praised for the work he did in the east Midlands over the two seasons he was at the club and has been tipped to become a better coach than both Frank Lampard and Steven Gerrard.
"DC United announced today that Wayne Rooney has been named as the club's new head coach," the Major League Soccer club said in a statement.
"Interim head coach Chad Ashton will remain in charge of the team until Wayne Rooney has received his work visa."
Rooney joined DC United in June 2018 as a designated player and went on to make 48 appearances, scoring 23 goals and getting 15 assists.
"Wayne is a soccer legend and one of the most exciting and dynamic up-and-coming managers in our sport," DC United co-chairmen Jason Levien and Steve Kaplan said in a statement.
"He's already proven in his young coaching career that he knows how to lead a group through adversity.
"He has an understanding of our league and what it takes to be successful in Major League Soccer thanks to his two-year stay with us as a player.
"The passion he showed while wearing black and red electrified our city and our club and we are so excited to welcome him back as our head coach."
DC United confirmed Rooney will join the club and assume the role of head coach pending the receipt of his P-1 Visa, with the rest of the coaching staff to be announced at a later date.
Between 2018 and 2020, Rooney made 52 appearances for DC, scoring 25 goals during his time in Washington.
He also provided 14 assists in that time - but one, in particular, stands out more than the rest.
With the scores level at 2-2 in the final seconds of a game against Orlando City - and his goalkeeper stranded in the opposition box after a late attempt at a winner - Rooney ran half the pitch to track back and deny his opponents a late goal of their own with a brilliant challenge.
But, not only that, the then-32-year-old hit an incredible pass into the box, before Luciano Acosta finished to snatch a dramatic three points.
And the Black and Red will be hoping Rooney can perform more miracles at the club, this time from the dugout, as they sit second bottom of the Eastern Conference.
Currently, they are level with Chicago on the fewest points in the Western Conference of the league, while they also lost 7-0 on Friday night at Philadelphia Union, matching MLS' record for largest margin of defeat.