The 51-year-old Chris Hutchins made 40 league appearances for the Saddlers during the 1990/91 season under Kenny Hibbitt.
Hutchings has previously had spells in charge of Bradford and Wigan in the Premier League and was most recently caretaker boss at Derby.
He will be assisted by another former Saddler Martin O'Connor, who enjoyed three spells as a player at the Banks's Stadium and was club captain.
Hutchings replaces Jimmy Mullen, who was sacked earlier this month after only six months in charge.
Yeovil Town 0 Leicester City 2
Leicester moved seven points clear at the top of League One after breaking down stubborn resistance from relegation-threatened Yeovil.
Already hit by suspensions, the Glovers lost midfielder Gary Roberts (10) with a suspected broken leg.
Steve Howard (57) broke the deadlock with a deflected drive before sub Joe Mattock (88), set up by debutant Tom Cleverley, made the points safe.
Mid-Week
Tuesday, 20 January 2009; Leyton Orient v Southend, (pitch inspection, 14.00), Peterborough v MK Dons, both 19.45.
Coca-Cola Football League OneLatest match Monday,
19th January 2009Pld Home Away Overall Pts EP W D L F A W D L F A W D L F A 1 Leicester City 25 10 2 1 25 7 7 4 1 23 12 17 6 2 48 19 57 +29 2 Milton Keynes Dons 25 8 1 4 23 12 8 1 3 28 15 16 2 7 51 27 50 +24 3 Millwall 24 9 3 1 18 10 5 2 4 16 16 14 5 5 34 26 47 +8 4 Peterborough United 24 8 3 1 25 11 5 4 3 21 19 13 7 4 46 30 46 +16 5 Oldham Athletic 26 7 5 1 26 12 5 4 4 18 21 12 9 5 44 33 45 +11 6 Scunthorpe United 25 6 3 2 24 15 7 2 5 22 19 13 5 7 46 34 44 +12 7 Stockport County 25 5 4 4 19 16 6 4 2 19 10 11 8 6 38 26 41 +12 8 Huddersfield Town 26 6 4 4 21 18 5 3 4 15 19 11 7 8 36 37 40 -1 9 Leeds United 25 6 2 4 23 16 6 1 6 18 17 12 3 10 41 33 39 +8 10 Tranmere Rovers 24 8 1 3 22 13 3 3 6 11 17 11 4 9 33 30 37 +3 11 Colchester United 25 4 3 6 14 14 6 2 4 25 24 10 5 10 39 38 35 +1 12 Hartlepool United 25 6 4 3 28 21 3 1 8 9 19 9 5 11 37 40 32 -3 13 Walsall 24 6 0 5 19 18 3 4 6 14 17 9 4 11 33 35 31 -2 14 Carlisle United 25 7 1 4 25 17 2 3 8 9 21 9 4 12 34 38 31 -4 15 Northampton Town 25 5 6 2 17 11 2 3 7 15 22 7 9 9 32 33 30 -1 16 Southend United 24 6 2 3 14 10 2 4 7 16 30 8 6 10 30 40 30 -10 17 Bristol Rovers 24 5 2 4 23 16 2 6 5 19 23 7 8 9 42 39 29 +3 18 Swindon Town 25 3 4 6 19 24 2 5 5 17 21 5 9 11 36 45 24 -9 19 Yeovil Town 25 2 6 5 14 19 3 3 6 9 18 5 9 11 23 37 24 -14 20 Brighton & Hove Albion 24 2 4 6 15 21 3 4 5 12 15 5 8 11 27 36 23 -9 21 Leyton Orient 25 2 3 7 10 18 3 4 6 9 16 5 7 13 19 34 22 -15 22 Hereford United 24 4 4 4 17 11 1 1 10 5 25 5 5 14 22 36 20 -14 23 Cheltenham Town 24 4 3 5 16 21 1 2 9 11 31 5 5 14 27 52 20 -25 24 Crewe Alexandra 24 4 2 6 16 23 1 2 9 13 26 5 4 15 29 49 19 -20