The move had been widely expected after the sacking of Wolfsburg coach and sports director Felix Magath late last month as Volkswagen, owners of the club, are eager to see the 2009 Bundesliga champions back on track.
Wolfsburg are 16th in the league, four points above a relegation spot.
"Klaus Allofs has helped mark the development of Werder Bremen for over a decade and celebrate sporting success here," Bremen board chief Willi Lemke told reporters.
"That is why we gave in to Klaus Allofs's request to deal with the transfer to Wolfsburg."
Allofs's first order of business is to find a replacement for Magath although interim coach Lorenz-Gunther Kostner has had a good run with his team winning three of four games since he took over in both the league and German Cup.
"With this step to Wolfsburg it is the end of 13 important years for me," Allofs said. "During this time I always had other offers that did not matter but now is the time to seek out a new challenge."
