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The board announced their decision earlier today after Donachie, who had been operating as caretaker boss, accepted the invitation to become manager on a full-time basis.
Under Donachie's guidance, The Lions have won five and lost just twice and have progressed in both the FA Cup and Johnstone's Paint Trophy, but his decision as hardly come as a surprise to many Millwall fans, who felt the Scotsman was always going to get the job, not matter what.
Speaking of his decision, chairman Stewart Till said "The first thing we needed to do was buy ourselves a bit of time to assess the situation after Nigel left us, to take stock and ensure that our next appointment was the right one.
"We knew that Willie would prove a safe pair of hands because he is a vastly experienced coach and assistant, but we wanted to be certain that he was the right man to take charge of the team long-term. There were clearly other candidates, but increasingly it became clear that the players were responding to Willie, and we began to see signs of a steady all round improvement in the club's fortunes on the field.
"There is still much to be done, but the Board have now reached the conclusion that Willie Donachie is ideally suited to preside over a continued progression and deserves the opportunity to show what he can do now that he has a number of the long-term injured players fit again."
The new boss, meanwhile, know he has a up-hill struggle ahead but is concentrating on getting Millwall to safety this season.
"I know that football is an instant results business," he told the club's official site. "My main goal is to win matches on a regular basis and get promoted. But I am also keen to get involved in the long-term development of the club so that Millwall can be successful for the foreseeable future.
"We have made some progress already, and it will be step by step going forward, but I am confident that we will get to where we want to be."