Chadwick spent the final two months of last season on loan with the U’s, helping them secure promotion back to the Football League via the Skrill Premier play-offs.
The 32-year-old has penned a one-year deal at R Costings Abbey Stadium after mutually agreeing to end his contract with the Club, which had 12 months to run.
The move sees Chadwick end a six-year association with MK Dons, during which time he played 246 games and surpassed Aaron Wilbraham as the Club’s second all-time appearance maker.
Speaking to mkdons.com, Dons manager Karl Robinson said: “I’m happy that Luke’s dream has come true by joining the club he’s supported since he was a boy. I’ve had the utmost respect for Luke since the moment I met him and I didn’t want to stand in his way.
“He is a unique character but also a talented footballer and I’m delighted to have had the opportunity of working with him.
“I want the MK Dons fans to never forget Luke because I, the staff and the players that have worked with him certainly won’t. I hope he gets the send off he deserves when we play Cambridge in pre-season.”
A former Premier League winner with Manchester United, Chadwick moved to stadiummk, initially, on loan in October 2008 from Norwich City and made his debut in a 4-0 win over Millwall just three days later.
Chadwick impressed in his three-month stint with the Dons and as soon as the Transfer Window re-opened in January 2009, then-manager Roberto Di Matteo signed the midfielder permanently, on a two-and-a-half year deal.
Helping the Dons achieve their highest-ever Football League finish that campaign, Chadwick’s standout performances continued and he was named MK Dons’ Player of the Year each of the next two seasons - the only Dons player to ever do so – before penning a two-year contract extension in March 2013.
One of only two players to surpass the 200 appearance mark for the Club, Chadwick is regarded, by many supporters, as one of the best players to wear the shirt at stadiummk and will, no doubt, go down as one of the Dons’ greatest ever signings.
Speaking exclusively to mkdons.com, Chadwick said: “I’m obviously sad to say goodbye but now is the right time to move on. I’ve got the opportunity to play for the team I’ve always supported which is brilliant for me but obviously I’m sad to leave Milton Keynes.
“I always enjoyed my time at MK Dons. I was made to feel welcome the second I stepped into the Club, myself and my family, and I built up a great relationship with everyone there. I enjoyed playing in front of the fans as well, it was just a great time for me.
“I’m sure the Gaffer will be bringing some other players in and hopefully they can get to where they want to be and there will be no one happier than me to see them do that.”
Supporters will have the opportunity to publically thank Chadwick when the Dons visit his new side Cambridge in July for a pre-season friendly.
In the meantime, the Club would like to thank Luke for his outstanding contribution and wish him every success in the future.