Knill, who played 154 times for United after signing from Bury in November 1993, took the hot seat at the Millers after Ronnie Moore was sacked last week.
The Millers played out a goalless draw with Nottingham Forest on Saturday, in front of a crowd of 8,448. The point leaves them rooted to the bottom of the Championship table, 11 points from safety.
He has been at the Yorkshire club since leaving Glanford Park in 1997, first as a player and then as youth team coach. He is now in charge of the first-team, with Mark Robins acting as his assistant.
Knill, who earned a cap for Wales, said: "I had no hesitation in taking the role, its a good opportunity for myself and Mark (Robins)
"It was a hectic first week - but I have been delighted by the response of the players in training.
"We have tried one or two different things, and the lads have worked very hard."
Chairman Peter Ruchiniewicz said "Alan Knill is very highly qualified and very well though of at the club, we were very impressed with him.
"He is a very self possessed and self confident man who is clear on how he can work and organise a team and he can't wait to get started fully as the man in charge."