Shiels, who played for a number of clubs during his career including Rangers and Kilmarnock, takes over from Kris Lindsay who left Stangmore Park last month.
The former Northern Ireland international is looking forward to the challenge ahead in what is his first managerial role.
“I’m delighted to join Dungannon Swifts, from the moment I met with the club it felt the right decision for me and I’m grateful to Keith (Boyd) and the board for the opportunity," he told the club website.
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"The club is going through a difficult period on the pitch at this moment and I’m fully aware of the challenge ahead but I’m excited to take it head on.
"I have a strong belief on how the game should be played and I will guarantee I will give everything to put a team on the pitch to compete and be successful.”
Shiels has been making giant strides as Assistant Manager of Northern Ireland’s Women’s Team where his father, Kenny, is the manager.
He was an integral part of guiding the senior women’s side to their first ever Euro Finals play-offs which will be played in April.
Dungannon Swifts FC Chairman, Keith Boyd, is thrilled to appoint Sheils as their new manager as he believes he can make a real impact on the current side.
“I’m delighted that Dean has agreed to become our new manager," he said.
"He has been getting rave reviews as a coach with the Senior Women’s International team and I’m sure he will bring the experience he has gathered from that into the job.
"I’m really looking forward to working alongside him and I wish him every success!”
Interim manager, Dixie Robinson, will be in the dugout for the Swifts game, against Coleraine this Saturday.
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