The former Hoops midfielder has been named Ronny Deila's assistant after the Norwegian was handed the top job.
It marks his return to the game more than a year after he stepped down from his role as Director of Football at Livingston and is his first dugout position since leaving Belgian side Charleroi.
Collins had been the leading candidate to become Deila's right-hand man and will give the 38-year-old the benefit of his knowledge of the Scottish game ahead of his first season at Celtic Park.
The former Scotland star helped the Hoops lift the Scottish Cup in 1995 and he is eager to add more silverware to his CV alongside Deila as a new green and white era kicks off.
Collins said: "It is a huge honour for me to return to Celtic, the club which has always been such a major part of my life.
"I am grateful to Ronny for giving me this wonderful opportunity and I look forward to working closely with him and the players to ensure that we can continue to bring the good times to Celtic.
"I know what a great club Celtic is and I know exactly what the club means to our fans.
"I will support the manager in every way and I am sure that together with our players, the backroom staff and the fans, we can all play our part in bringing success to the club."
Collins will begin his new role immediately as he and Deila get down to business ahead of the new Premiership campaign.
The Celtic squad will get their first taste of the new management team when they return to pre-season training in the coming days ahead of the first Champions League qualifier next month.
The Hoops must hit the ground running under Deila and Collins, and the new Parkhead boss is confident he has appointed the right man for the job.
He said: "I am delighted to appoint John to the position of assistant manager.
"I have had a number of meetings with John, I can see what the club means to him and I can see the qualities that he will bring to Celtic.
"He is a first-class coach and has ideas on football which are very similar to mine so I am sure he will be a great addition to my team.
"He will start immediately and together we will now prepare for this first day of training next week.
"We have important matches in the near future so I am pleased that I have been able to secure him so quickly. Now we can get to work."