Keates, 39, rejoins the League One club having served them as a player twice.
A favoruite at the Racecourse ground, the club’s former midfielder becomes the second National League manager to move up to the EFL this season following Neil Aspin’s appointment at Port Vale.
The Red Dragons’ are fourth in the table and begin their search for a new manager will the club in the middle of a promotion battle.
"We want to place on record our appreciation to Dean for his time here as a player, captain and as First Team Manager," the National League club said.
"Walsall FC approached us and triggered the release clause in Dean’s contract in full, therefore we were obliged to allow Dean the opportunity to speak to the club that he supports.
"We are in a strong position and our focus remains on achieving promotion to the Football League this season.
"There are just nine games of the season to go and now more than ever, we need the support of each and every fan of Wrexham AFC to rally around our interim management team of Andy Davies and Carl Darlington, the remainder of the staff and the playing squad.
"We are fully focused on achieving three points at Woking on Saturday.
"While we have already begun the search to replace Dean and complete our management team and intend to make an appointment as quickly as possible."