The Milwaukee Journal Sentinel first reported the coaching move, which sources confirmed to ESPN.com's Pat Forde.
Alvarez is in his 16th season as the school's football coach and has also been serving as the athletic director since last year.
Bielema, who is 35, is in his second season as the team's defensive coordinator. He previously was the co-defensive coordinator at Kansas State.
Alvarez is 108-70-4 at Wisconsin with three Rose Bowl victories and seven other bowl appearances.
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