In his playing days, the former Llanelli, Scarlets, Sale Sharks and Bristol scrumhalf played a pivotal role in Wales' two Grand Slam successes in 2005 and 2008 and he also captained his country at the 2007 Rugby World Cup.
He represented the British & Irish Lions on the 2005 tour to New Zealand, starting all three Tests against the All Blacks.
Peel says he is excited by a new challenge in Belfast:
"I'm delighted to have this opportunity. Ulster is one of the big clubs in European rugby and I'm looking forward to working with a large contingent of quality players.
"Coaching was always a natural progression for me and I'm really enjoying my role with Bristol. Over the years I've spent time in different environments trying to pick things up that will benefit my career and this move to Belfast is another step in the right direction.
"I've talked with Les (Kiss) a lot over the past couple of weeks and it's exciting for me to work with someone of his calibre. I'm looking forward to getting started in the summer, but my focus will be with Bristol until the end of the season."
Commenting on the announcement, Director of Rugby, Les Kiss said:
"I'm very pleased that Dwayne will join us from next season. He's a talented coach who has a great understanding of the game and I'm really excited by what he will bring to our environment.
"It was obvious through my discussions with Dwayne that he has an exceptional coaching eye and he will provide us with refreshing insight and ideas.
"After Jono (Gibbes) agreed to join us, it was clear that Dwayne was going to be a great fit for our coaching group for next season. Once I identified Jono and Dwayne, the Ulster Professional Game Board was fully behind my decision, and Bryn (Cunningham) worked hard to ensure the deals were completed. They will both be terrific additions."