Deco played four seasons for Barcelona AFP
The 45-year-old Brazilian-born Portuguese international midfielder has signed a three-year contract.
"Deco will be in charge of setting FC Barcelona's sporting philosophy and putting together the squad with the coach and the coaching and becoming head of the football section," the club said in their announcement.
Deco first joined Barcelona from Benfica in 2004 and won La Liga twice and the Champions League in 2006 in four seasons at the club.
He then played two seasons for Chelsea before returning to Brazil and finishing his career with four seasons at Fluminense in Rio de Janeiro.
The appointment follows a reshuffle Barcelona announced in May.
The team's current director of football Mateu Alemany is leaving the club when the transfer window closes.
Sporting director Jordi Cruyff left in May.
Wednesday's announcement added that "in the coming weeks the club will release details of the FC Barcelona sporting structure."
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