England's most-capped right-back, who holds UEFA A and B Coaching Licences, has signed a four-year contract with the Football Association.
The 37-year-old won 85 caps for his country and participated in five major tournaments from 1996-2006 and since retiring last year has won widespread acclaim for his performances as a pundit and co-commentator on Sky Sports.
"Gary has achieved so much in the game as a player with Manchester United and England. He has obtained UEFA coaching qualifications and will be tremendously respected by the players because of his vast experience as a player," said Hodgson in a statement on The FA's website.
"At my first meeting with The FA, I explained that Gary was someone I wanted as part of my staff. I think it is very important we have a younger coach who knows the dressing room and is very experienced at international level.
"That he has represented England as a player at five major finals tournaments will make him an invaluable member of staff."
Neville joins Ray Lewington, Ray Clemence and Dave Watson as part of Hodgson's coaching staff as the former West Bromwich Albion boss prepares for this summer's European Championships.
"Roy asking me to be a part of his staff and to work with the national team is not only an honour but a very special moment for me," said Neville.
"I had absolutely no hesitation in accepting this role and I am relishing the opportunity to work alongside Roy and the team at the Euros and through to the next two tournaments."
Neville will continue his work as an analyst with Sky Sports.
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