Watkins was a director at United for 28 years between 1984 and 2012, and he is currently chairman of British swimming and a non-executive director of the Rugby Football League.
He will now return to a football boardroom, almost a year since he left his Old Trafford post, and is excited about the prospect.
"It's great to be back in football at club level and my message is loud and clear - Barnsley means business," said Watkins.
"The Championship is a hard league with many great clubs and, when you think a club was relegated last season with 54 points, that sums up the quality.
"Our task now is to make progress in the league, strengthen our position and get even more fans behind the club.
"I can bring a wealth of football knowledge and experience, having been involved with the game at the highest level with Manchester United for over 28 years."
Barnsley owner Patrick Cryne added: "Many people will know Maurice from Manchester United, but what they won't know is that he operates in a range of different commercial spheres and sports interests.
"He is a sound strategic thinker and very clear on how to organise and how a football club should be run."