The 37-year-old Australian was man of the match for Warrington Wolves in their 2009 Challenge Cup final win over Huddersfield Giants.
He played as a half-back for Canberra Raiders and Manly Sea Eagles before joining Warrington in 2008.
Monaghan was also a Challenge Cup winner against Leeds Rhinos in 2010 and 2012 and after hanging up his boots at the end of the 2014 season he spent three years as assistant-coach at Catalans Dragons.
Monaghan - whose brother Joel played for Castleford Tigers in 2016-17 - said: “When the opportunity arose to come to Wakefield I was certainly keen to make the move.
“Wakefield is a club with a long history. I was really impressed with what the club seemed to offer after seeing how they played last year and the attitude they go around their footy with.”
Chester commented: “I am delighted to have Michael Monaghan come on board as assistant-coach. We took our time to decide who would be the perfect fit for Trinity and Michael ticked a lot of our expectations.
“He had a fantastic playing career at Warrington before taking that step up as assistant-coach at Catalans.
“I am looking forward to working with him.”
Monaghan’s appointment will strengthen Trinity’s backroom staff following John Kear’s departure to become coach of Bradford Bulls.