The 37-year-old led the Robins to last season's Challenge Cup final, but was sacked last month.
He replaces Australian Brian Smith, who resigned last week after winning just one of their first five games.
The Wildcats have also announced that Batley and Wales coach John Kear will join the club as director of rugby for the 2017 season.
Chester said: "I am delighted to become head coach of Wakefield Wildcats, especially as it is my home town club and a club with a lot of traditions.
"I have been stood on these terraces as a young kid and I am really proud that I now get to coach this great team."
Kear, who was appointed as Wales coach in July 2014 and will combine that post with his new role, added: "I am looking forward to joining the Wildcats and I will look to bring stability and improvement across the whole football department."
"My appointment at Wakefield in no way affects my role as head coach of Wales and I am looking forward to the Rugby League World Cup qualifiers this autumn."
Smith guided Wakefield to Super League survival with victory in the Million Pound Game against Bradford in October.
He signed a new one-year contract with the club after that, but left this month after a breakdown in his relationship with chairman Michael Carter.
Wakefield, who face Hull FC on Friday, are currently 11th in the 12-team Super League.

Melissa Reid, 22, from Lenzie, near Glasgow, was arrested with Michaella McCollum, of Co Tyrone, after being caught with 24lb (11kg) of cocaine at Lima airport in 2013.
They struck a plea deal for a reduced sentence of six years and eight months.
Reid, who was expelled from Peru under an early release scheme, arrived at Glasgow Airport on Wednesday evening.
She touched down in Glasgow at 21:44 after travelling from Lima, via Amsterdam, with her father William.
She did not appear before waiting media at the international arrivals area, and is thought to have accepted an airside transfer.
It is understood that Reid will not have a criminal record in the UK as a result of her Peruvian conviction.
Any offences she committed in the UK before she became a drugs mule would remain.
McCollum, 23, was released at the end of March under parole conditions which mean that she has to remain in Peru for an undisclosed period of time.
Reid has served about a third of her sentence and under Peruvian law was eligible to be deported according to the early release scheme for foreign prisoners.
She has also paid a fine of 10,000 Peruvian soles, just over Â£2,000.
A spokeswoman for Peru's prison service, Janeth Sanchez, said Reid "served her time in prison according to the law and can now go to her country, free".
A Scottish Prison Service spokeswoman confirmed it was not involved with Reid's case.
Both Reid and McCollum were caught with an estimated Â£1.5m-worth of cocaine at Lima airport on 6 August 2013 while attempting to board a flight to Madrid, in Spain.
The cocaine was discovered in food packets hidden inside their luggage.
They had initially claimed they were forced to carry the drugs, but pleaded guilty to charges later that year.
They had faced the prospect of a maximum 15-year prison term but struck a behind closed doors plea bargain to secure a shorter sentence.
Following her release, McCollum told the Irish broadcaster RTE she had been "very naive, so young and very insecure".
Reid's father William has previously said the impact of his daughter's imprisonment on his family had been "horrendous".
A spokeswoman for the Foreign Office said: "We continue to provide assistance to Melissa Reid and remain in contact with her family and local authorities."
Wakefield Trinity Wildcats have named former Hull KR boss Chris Chester as their new head coach.
[NEXT_CONCEPT]
A Scottish woman jailed in Peru for smuggling drugs has arrived back in Glasgow after being released from jail.