Flynn joined the club as chief scout last year and took over as caretaker-boss after Saunders left to join Wolves and he has now been handed the reins on a permanent basis.
The 57-year-old enjoyed a successful playing career before cutting his teeth in management with Wrexham between 1989 and 2001.
Flynn also enjoyed a spell in charge of Swansea and was caretaker-manager of Wales in the wake of John Toshack's departure in 2010.
Club captain Rob Jones will continue to support Flynn in his role as player-coach at the Keepmoat Stadium.
"I am delighted to have received the news from the Chairman and Board of Directors this afternoon," Flynn told Doncaster's official website.
"Continuity is key, I've been here six months and in-charge ten days and nothing is broken so nothing needs to change.
"When you walk into a dressing room, you can tell there is success in the air, and that's the feeling I got when I came down to the training Ground at Cantley Park. I could sense that the players were hungry for success.
"In the words of the chairman (John Ryan), the aim for this season is not only promotion but going up as champions as well - that positive attitude has come from the chairman and the board and we will try and carry that out."
Ryan himself was delighted to confirm Flynn as Rovers boss.
"We are pleased to announce that Brian and Rob have taken up our offer to manage the team and are now fully focused on the game against Leyton Orient," he said.
"Brian has a great history at the club and is being assisted by our current captain Rob Jones, who has earned the respect of his teammates and fans this season through his commanding leadership.
"We had an overwhelming number of applications for the position, including former International and Premiership managers.
"However, after a detailed process we felt that our initial choice Brian was the best person to put in charge and would allow a seamless transition."