Watkins, who holds several key positions including chairman of British Swimming and is a non-executive director of the Rugby Football League, will return to a football boardroom almost a year since he left his role at Old Trafford.
Watkins was a director at United for 28 years from 1984 to 2012 and was also a director of Manchester United PLC between 1991 and 2004.
"It's great to be back in football at club level and my message is loud and clear - Barnsley means business," Watkins said of his new appointment.
"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."
Along with his former roles at Old Trafford, Watkins' football experience has a wider reach as he was a key participant in the formation of the Premier League and its rules and has been involved on various FIFA committees to deliver new international regulations.
Barnsley owner Patrick Cryne said the club had appointed Watkins due to his breadth of experience across different sports and to provide fresh leadership at board level after operating without a chairman for some time.
"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," Cryne said.
"He is a sound strategic thinker and very clear on how to organise and to say how a football club should be run. He can see reasons for change which will make us a more effective business. Maurice has a raft of experience and he will drive strategy and the change-management agenda."